Hope For The Best, Prepare For The Worst
I know this won't come as much of a surprise to some readers, but the media has once again missed the boat.
This past Sunday, the Los Angeles Times ran a cover story in the business section about buying a used car. What?
Nowhere in the entire business section was there any article on the troubles in the financial markets. What a waste of newsprint! No wonder newspaper circulation is down.
Right now, we are suffering through one of the biggest economic storms we've had in decades, and all the Times can do is give you tips on how to kick the tires on that used coupe.
The way I see it, we are dealing with four separate bear markets right now. Real estate, equities, municipal and mortgage backed securities, and the U.S. dollar all are struggling mightily, and don't think for one moment that this thing is going to blow over in a few weeks.
To help you survive these conditions, I've prepared a checklist of what to do and what issues you need to make sure you're addressing right now. Here is my Financial Survival Kit for the current bear markets.
1. Preserve your capital. The worst mistake is losing money when you don't have to do so. Rein in the greed and cultivate a sound level of good, old-fashioned fear.
2. Consolidate your accounts. Now is the time to get all of your money in one place.
3. Just say no to high yield. Any security that is paying greater than 4% right now is risky, so make sure you know the details on all of your income offerings.
4. Municipal bonds are in big trouble. Weird things happen in bear markets, and in this brutal credit bear we are seeing prices of municipal bonds plunging. Don't assume your muni bonds are safe.
5. Uninsured bank deposits -- just say no. Under no circumstance should you have more then $100,000 at any one bank. Banks can't be trusted right now. My advice for an ultra safe investment vehicle is a Treasury-only money fund.
6. Pay off your debts. If you have cash, pay down your credit cards, student loans, home equity credit lines, etc.
7. If you have considerable assets and if you are not attending to those assets, hire a fee-only investment advisor to help you. You don't know what you don't know. If you're not following these markets closely, find someone who will do the work for you.
8. Stay away from stocks right now, including international stocks. Most portfolios I am looking at are still fully invested. Now is not the time to have a bull market portfolio.
9. Get your taxes done and spend more time managing your tax liabilities in the future. I am working on my 2007 taxes right now, and I am setting up better tracking systems for 2008.
10. Patience, patience, patience. This market tumult could be a long, draw out affair. We don't know how long this storm will last but the winds are getting stronger, not lighter. Be conservative, be mindful, and be cautious. Together, we'll weather this storm.
Fabian Wealth Strategies is a registered investment advisory firm specializing in Exchange Traded Funds. Our philosophy is grounded in transparency, risk management and low cost. We are now accepting new clients for both income and growth portfolios. We want to help you safely grow your investment portfolio and secure your financial future.
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