Everyone’s talking about the financial crisis, exchange traded funds (ETFs) and what’s to be done about it.
Americans’ retirement plans have lost as much as $2 trillion over the past 15 months. And while Money Magazine points out that it’s okay to feel afraid, it’s a little less okay to make decisions based purely on it. Any decision you make now could have a long-term impact, so it’s important to be rational.
Two things are important to note: don’t stop contributing to your 401(k) just because of the crisis, and if you’re a buy-and-hold investor, you don’t necessarily have to sit back and take these steep losses. If it would make you feel more comfortable, it’s all right to see one-third of your portfolio and just get back in when the trends are once again up.
The Federal Deposit Insurance Corporation (FDIC) has also taken measures to protect bank accounts by temporarily increasing the limit for insurance from $100,000 to $250,000 per depositor. This will remain in effect until Dec. 31, 2009. The coverage for retirement accounts remains the same, at $250,000.
Kelli B. Grant for Smart Money offered tips on trimming expenses from the household budget. Look at your bills and see what you’re paying for but don’t use. Buy generic food and drugs, and take a look at frozen fruits and vegetables. Stick to regular gasoline, in most cases. The winter months are coming – throw on an extra blanket while you lower the thermostat by a degree or two.
As we’re all trimming our budgets and scaling back to the necessities, it’s become obvious why this crisis affects everyone. Dave Kansas for the Wall Street Journal says that it goes even deeper than that, though. The credit markets touch on everything from 30-year Treasury bonds to securities tied to auto loans, and essentially act as a lubricant to the nation’s economy.
Already, we’ve felt the impact: auto sales are down in part because of the difficulty in securing financing; getting mortgages is a lot tougher; credit card interest rates are up, and so on.
There have been a lot of news reports out there talking about the crisis, and it’s important that we remain rational and remember that this, too, is going to pass someday. It’s also important to realize that no one truly knows the outcome of this, or when things will get better or if they’re going to get worse.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.