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Do You Fear A Recession?

August 5, 2011 · 12 comments

in Personal Finance

What an exciting week it has been!  We raised the debt ceiling, the stock market tanked, and the millage passed to keep my local library open.  Oh yeah, we also might be heading for another recession too.  Of course, it is hard to know when you are in a recession since it takes several months of declining data for a recession to become ‘official’.  So, in the meantime, investors can fear a recession, sell their stocks in a panic, and watch the stock market tank like it did yesterday (August 4th, 2011).

If There Is A Recession, What Will Be The Magic Elixir To Pull Out Of It?

I am very curious to see what the government reaction will be if we do head into another recession.  There will be many people losing unemployment benefits in the coming months- will there be yet another extension of unemployment benefits? Will the government spend even more money to create more stimulus packages?  What new tricks can be played to fix our economy?  Will new jobs magically be created just in time for the upcoming election ‘season’?  Perhaps I can pay more in taxes?

What Is The Right Investment Course In Uncertain Times?

There is a lot of uncertainty out there, and I am not sure what to think.  When the market started going downhill in 2008, I held on for dear life and I did not sell.  In retrospect, I am glad I did not sell because the market did recover substantially from the 2009 lows. However, I am getting older each year, and I might need to start thinking about protecting our investments a little more.  Whereas I don’t want to panic and sell at lows, I also don’t want to be the last one turning the lights off with just a dollar in my hand.  One thing I do recommend during both down and up times is to really evaluate your risk tolerance and also think about your age and how many more years you plan to work. If you find that the lows churn your stomach and make you lose sleep, then maybe moving into more conservative investments would be a good idea.  If the stock market is soaring and you have made significant gains in your investments, maybe you should think about selling some of your portfolio and locking in those gains, especially if you are getting close to retirement age.

What Are You Going To Do?

What are your plans for the immediate investing future?  Do you plan on buying more stock while others panic?  If so, do you fear you might be trying to catch a falling knife?  Or, do you have a call in to your broker as we speak saying ‘sell, sell!’?  Personally, I will stay the course for now, and see what happens.

(Please remember, I am not a professional investment adviser and none of the opinions in this post are intended to serve as professional finance advice.)

 

 

 

 

 

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{ 11 comments… read them below or add one }

101 Centavos August 5, 2011 at 7:01 am

I think I’ll buy some more stocks as they go on sale. If the underlying value is still solid, no reason not to snap up a bargain.

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The Biz of Life August 5, 2011 at 8:51 am

I will keep my planned allocation between stocks and bonds, and will use corrections as opportunities to buy more at cheaper prices. How do we stay out of recession? A good start would be to roll back all government regulations that have been implemented in the past several years. Business is scared of government right now, and is unwilling to take risks.

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No Debt MBA August 5, 2011 at 9:02 am

I hope everyone else sells then 101 Centavos and I can pick up more bargains.

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Jon - Free Money Wisdom August 5, 2011 at 9:58 pm

Agreed. I am with ya on that. The more the stocks fall the more I will snatch em up. Our economy does look pretty bleak, however.

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First Gen American August 5, 2011 at 9:18 am

I’m not planning on selling my stocks in my retirement plan but I’m much more diversified than I was the last time around. I’ve changed a lot in my financial life since 2008 and I feel much better about my personal solvency this time around.

We actually have way more cash reserves this time around and over $1000/month fewer fixed expenses thanks to paying off some mortgage debt. Because of my volunteer work, worst case I can get a job at a nonprofit in town that is desperate need for female STEM people.

I’m actually glad 2008 happened because it slapped some sense into me and I’m not skating on such thin ice this time around. I really hope there are a lot more people in my position who clamped down on spending and have a bigger cushion this time around.

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Linda August 5, 2011 at 9:42 am

We were due for another market adjustment. These happen every few years and you just have to roll with them. My 401(k) asset allocation is balanced, and I’m not going to be retirement age for another 23 years, so there is plenty of time for this phenomenon to even out. If I were closer to retirment I’d be more worried; then again, if I were closer to retirement my 401(k) wouldn’t have as many equities in the asset allocation.

I was thinking the same thing as 101 and No Debt MBA: buy! Maybe now is the time for me to figure out all the complexities of investing as an employee of a regulated business and pick up some bargains!

And I don’t think “business is scared of government right now.” It’s more complex than that.

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krantcents August 5, 2011 at 11:37 am

I still plan on dollar cost averaging into the market. I can not time the market, so I consistently invest. My asset allocation reflects my risk tolerance.

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Little House August 5, 2011 at 3:10 pm

I’m holding firm for right now. Our mutual funds are doing well, but our stocks are tanking. However, we’re really hoping to make up the difference the last quarter of the year. Something positive has to happen soon, right?! Or am I just too much of an optimist?

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Financial Samurai August 6, 2011 at 1:33 pm

I fear a bull market, not a recession!

A recession is great b/c there are less crowds and things are cheaper. So long as you have a job and are getting paid that is…

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Moneycone August 7, 2011 at 8:52 am

I actually prepaid my Roth – lots of bargains out there!

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