Tue 23 Sep 2008
The Slow Economy is an Opportunity: Get in Now
Posted by Jack Gamble - Man Overboard under Babeled, Business, Current Events, Economics, Society
The good news is:
- I am over twice my annual income in debt
- My 401(k) is down 20% on the year
- My Company stock is 30% down from its 52 week high
- I purchased my home in the summer of 2006 (at the top)
My financial outlook has never felt so good.
Why?
I believe in the strength of the US economy.
Imagine if you had loaded up on a wide array of nearly worthless stock during the great depression. The massive number of then-worthless shares today would no doubt amount to large fortune.
Granted today is no great depression, and I don’t claim to be able to pick the next big winner on Wall Street. Actually, quite the opposite, 3 out of my 5 stock picks from a few years back have tanked and the other two are flat.
So what am I happy about?
- I am loading up on cheap shares of several leading mutual funds that have all been hit hard this year.
- I am only 28 years old and I don’t need the money in my 401(k) for decades so I can afford the time to wait out this storm
- I knew the housing market would collapse so I bought a home well within my means that has not lost one cent of value due to a good location and a solid market for low/mid income housing.
- My company stock is in the energy sector which has overreacted to the drop in oil prices and has allowed me to get in at or near the bottom.
In a nut shell, I am looking at the economy today not with a sense of panic or disarray. I instead ‘lick my chops’ at the opportunity to position myself to profit greatly when the market recovers.
And recover it will.
It may take one year or it may take five. Given my ability to live beneath my means and my lack of taste for the fine things in life, I believe I have the luxury of riding out this storm for as long as it takes. When the storm is over, and it will end, I will be there to grab the rebound.
My friends, things obviously don’t look good right now, but we, the young professionals need to find the silver lining in this economic cloud and put ourselves in position to make the most of it.
My advice to all of you is to make a small sacrifice over the next two years or so. It may hurt in the short term. You may need to be smart with your next vehicle purchase. But this lull in the economy is a blessing in disguise for those of us who missed out on the opportunity of the real estate market a few years back.
Do your diligence, ask a professional, tell a friend. There is money to be made here and this time we won’t need to be filthy rich to do it.
~Man Overboard
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September 23rd, 2008 at 9:18 am
Jack, that’s exactly the attitude to have and every American should note it as well!
When the stock market is down 20%, I see a big red tag on it saying “20% off”
As soon as everything reaches it’s pit and starts on an upswing, we are going to see economic growth like we have never seen before.
September 23rd, 2008 at 9:36 am
Jack you raise an excellent point about our demographic being able to pounce and reap the rewards of the next economic up-tick. Barring any further catastrophe things will certainly improve. Of course, there are other demographics that have crashed back to reality with this down-turn, but that is the nature of economies. Nevertheless, things even out and continue to grow in the end.
Things really looked bleak in 2004 when housing was so over-inflated that it seemed many young people, with and obvious lack in equity, would never be able to afford a home (especially in the Northeast). This despite a college education and in many cases even a good job.
Your frugality will serve you well in the long run my friend, just as long as I don’t have to eat cold beans in a can at your wedding. That entree is reserved for you my friend; on a silver platter!
September 23rd, 2008 at 7:18 pm
I am no financial expert by any means but I doubt that right now is a great time for any age group to be buying up stocks.
On the same token, I also have a 401K which is 10% under for the year. My 401K is diversified and although the thought of moving all of my vested earnings into a stable fund might be tempting, it would he highly unwise because the market will bounce back eventually and as you said Jack we are young enough to reap the rewards when it does.
September 23rd, 2008 at 9:25 pm
I’ve heard a lot on the news that this is the type of market that makes millionaires. After hearing this, and in light of my complete lack of investment knowledge, I’m considering seeing a financial adviser to help decide which are the best options.
But…I think I still am going to wait till after I find out the result of the $700 billion bail-out plan by the Treasury Department. It’s possible Congress may stall longer than they were advised, and, who knows what kind of effect that will have.
Mind you, who knows what kind of effect this bail out will have…
September 23rd, 2008 at 9:34 pm
Andrew, I’m glad you asked.
Rineberg - now is a very good time to buy stock in companies that are not directly linked to the financial industry, but rather have seen declines in share price due to the stock market equivalent of a gaper-delay. For instance, many manufacturing, energy, telecom, medical, etc. etc. all have taken share price hits from the mass Wall Street sell-off, but that doesn’t mean that their prices will not normalize in the near future, thus making those who bought now a lot of money. Buy, buy, buy!!
September 23rd, 2008 at 9:43 pm
Oh, and Andrew, don’t go see a financial advisor. We can discuss in more depth, but the one thing you need to know going in there is: they are there to profit off of your investments, no matter how that is accomplished within the limits of statutory regulations. Meaning, you could go in there with the intent I believe you have, and they will try to sell you some sort of insurance policy(ies) and then proceed right to mutual funds. Now, that may sound innocent and prudent enough, however there are two types of mutual funds (1) No-load, which do not have a commission fee [broker fees still apply to make the actual transaction] and (2) Load funds which have a commission fee plus the broker fee to complete the transaction. Either way, you can get a cheaper broker fee at one of the online trading companies and the same selection of investments while paying less. All you have to do is take an hour or so to read the wealth of information on the website you are using (they all have a TON of explanations and research info) and perhaps consult a friend you happen to have that can explain anything in greater detail than the website provided if you so wish.
September 23rd, 2008 at 9:58 pm
Yeah that’s a discussion we’ll have to have no doubt.
September 23rd, 2008 at 11:19 pm
I highly recomend Rick Edelmen. I’ve both read his books and heard him speak publically and he has definatley made an impression on me.