The past week was a frenzy of one thing bad thing after another in the financial world. The bankruptcy of Lehman Brothers, the takeover of Merrill Lynch, the federal bailout of AIG all resulted to a big scare for the ordinary investor like us.
There was a time when I was clueless about the goings on in Wall Street and I couldn't care less. A time when Fannie Mae, Freddie Mac, subprime or even mortgage didn't make a blip in my everyday life. Gone are those days of sublime, worry free ignorance.
I don't even deign pretend that I understand a whit of what's going on or what has happened. What I do know is that the past week will affect our retirement funds much like how the past year had -- negatively. The only consolation is the fact that we are still a few decades away from retirement and hopefully, have enought time to rally and bounce back. I shudder to think what the people who are just 5 to 10 years away from retirement are thinking and feeling.
Contrary to the doomsday atmosphere that you get from the media, a lot of financial blogs and columns advise the ordinary investor to practice zen in the midst of all these chaos. In other words, instead of pulling out your money and selling stocks like crazy, they say, stay put. Dont' panic. If you do have to do something, then make sure that it's to ensure that your assets are well diversified.
The best advice I've read is from the most recent issue of Time Magazine and I quote:
"Coping in this new world will require adjustments by millions of Americans. We all have to start living within our means -- or preferably, below them. If you don't overborrow or overspend, you're far less vulnerable to whatever problems the financial system may have."
Simple yet brilliant.
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