By Cindy Diccianni RN, CSA, CLTC, Financial Advisor
February 2009
Even though February is a pretty short month, it’s still a time when we need to keep a close watch on our spending and financial goals in the short and long term. Especially with the word “recession” floating around, it’s important that we keep on track and refocus after the holiday seasons have ended and the new year has gotten us back into our usual schedules.
As far as the subject of a recession goes, the fact is we are in one. We have been in recessions before, but our situation is unlike any other in previous cycles. The government’s bailout plan is also something that has never been instituted, so our situation is quite unique and this has obviously caused some uncertainty for forecasters. Such exceptional circumstances in the financial world have undoubtedly caused investors some anxiety too and have deterred some from keeping their money in the market. But, as I’ve continually stated, this “gut reaction” by pulling out or remaining static with your investments can cause permanent damage to your nest egg.
While it’s always smart to consider the short term effects of your investment decisions, considering your financial obligations, income, and tax liability, is also of equal importance to plan for the long term. Although it may be hard to fathom right now, our market trends are cyclical and history has shown time and time again that such dips are eventually followed by subsequent rises and recovery.
According to JP Morgan’s “Investing Without Precedent” article at the beginning of this month, there are a few key points we should keep in mind about the long term future of our economy:
The economy has the potential to grow up to 3% each year – 2% productivity and 1% population growth.
- Since 1900, the economy has been in expansion 76% of the time – meaning the potential growth that is available is generally utilized.
- Valuation remains an important factor – the common “buy-and-hold-investing”strategy must be done consciously, taking into account what you originally paid for each investment.
- Keeping these points in mind, our team knows that this is a time of challenge for investors and that quality, defensive investments, inflation-protected assets, and hands-on managers are the keys to this issue. Remember, there are some positive things going on beyond the recessional cloud cover we’re under. For example, volatility is easing, bank lending is slowly improving, and housing is becoming more affordable. These are definitely positive indicators that signal a reaction to the situation, but also opportunities for smart investing and long term planning.
Most importantly, keep in mind that the Diccianni Financial Group team is always willing to discuss your issues, concerns, or goal changes at any point in time. We are optimistic, yet cautious about the future, and are continuing to expand our team to provide you with more satisfying and well-rounded services. As always, feel free to contact us with your questions or concerns and we will continue to keep a watchful eye.