If you’ve seen any financial news lately, you’re aware of some of the ups and downs the stock market has experienced. Stock market volatility is not uncommon, but that doesn’t make it any less scary to stomach.
However, periods of uncertainty present some of the biggest opportunities for investors to sabotage their financial plans. Here are three things you should avoid doing during a stock market decline.
I’ve written a lot about budgeting, so any regular of my blog has heard a little about why I feel it’s important and how to do it (without pulling your hair out). And while I certainly enjoy budgeting more than the average person, I think it can be a really easy, non-threatening experience for most families.
I thought it might be helpful to share a sneak peek into my own budget from last month. I love doing this sort of thing. It helps me see my budget from a different point of view, and you might find it helpful as you put your own budget together.
My father passed away two years ago. He worked his whole career at a job he enjoyed. As a family of 11 (Mom, Dad, 5 boys and 4 girls) we never had a lot of extras, but our needs were met. Fortunately, my dad had a generous pension and government health benefits throughout retirement, which not only provided for my parent’s living expenses, but the extensive medical care my dad required.
But there’s really no “nest egg” for his children to inherit. The pension will stop after my mother is gone, as will the health benefits. There isn’t a lot left as far as other assets are concerned.
And that doesn’t matter at all.
I love the film Hoosiers. Not just because it’s a great Cinderella story, but because it has so many great lessons to be learned. Lessons about the values of fundamentals.
The basketball coach in the film is a relentless fundamentalist of the game. For example, he obsesses over his players making “three passes!” before anyone takes a shot. This is initially met with outcry from the fans and rebellion from the team, but as the film progresses the coaches commitment to the fundamentals wins his team over…all the way to the championship.
I’ve been thinking recently about some of the fundamentals of another game—the tax game. Few of us actually look at taxes as a game (rather, a complete headache), but the game becomes much easier—perhaps even fun—when the principal rules are understood.
When speaking on a radio broadcast in 1939, Winston Churchill made the following comment about Russia and its national interests:
"I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma..."
When I talk to people about investing--especially in the stock market--I get the same kind of vibe. The stock market feels so complex, puzzling, and unpredictable, that the lack of understanding fosters a distrust of it, and lack of willingness to participate.