What The Volatility in the Markets Taught Me in 2008

Today's guest author is Maria Palma owner of www.FullyStocked.info. Maria is going to share what she learned from the volatile 2008 markets. After reading this article I reflected a bit on what I learned last year, and I have to say Maria seems to be right on point.
2008 was a year full of ups and downs in the financial marketplace.  It seemed like every time I turned on the news, reporters were relaying some kind of financial catastrophe.  All of this bad news was enough to make ones hair fall out completely - that is, if you got caught up in all of the havoc.

There were many lessons to be learned in 2008, and this is what the volatility in the markets taught me:

1.  Stop reading the financial news every day.  Think about it - if you turned on the news every day and heard all these depressing stories of people losing their money, it can definitely mess with your psyche.  As someone who invests for the long term, listening to all these stories caused me to doubt my own investing strategy even though I was fully aware that this was just a temporary situation.  My philosophy when it comes to the financial markets has always been:  What goes down eventually comes back up.

2.  Don't put all of my eggs in one basket.  Heard that phrase before?  This was probably the biggest lesson that people learned in 2008.  I was hearing stories of people who invested all of their money in one mutual fund or put all of their savings in one bank, only to lose it all because of the unstable markets.  If there is one thing I've learned from my years of investing, it's not to depend on one institution to help me with my money.

On the same token, I've learned not to invest all of my money in the stock market.  There are many ways you can invest your money - there's real estate (with all the foreclosures taking place, it's a great time to buy), plus there are business ventures you can become involved with.  Not only do I invest in stocks, but I also have several businesses, and currently I'm looking at starting a REIT (Real Estate Investment Trust).

3.  Be selective about where and who I get my financial advice from.  There is a wealth of information out there (especially on the internet!) about how to trade, where to trade, what tools to use, etc.  There are many fast-talking financial advisers who will tell you to buy this or invest in this or that.  Just because they work for a big-name financial firm doesn't mean they know everything!  Some of these so-called advisors are only thinking about their own self-interests.  However, that's not to say that there are not advisors who are ethical, honest, and have their client's best interests at heart.

I've learned to go with my gut feeling when it comes taking someone else's financial advice.  I provide advice on my blog and it's based on my own investing experience.  I realize now that each person has their own financial goals, so their trading or investment strategy may be completely different than mine.  What works for me may not work for someone else.

Yes, I learned many financial lessons in 2008 and I'm sure each of you had your own lesson to learn as well.  If there's one piece of advice that I believe everyone should follow, it's this:  Educate yourself thoroughly on any type of investment you make and most of all...read the fine print!
Maria Palma is the owner of www.FullyStocked.info, a blog that offers investing information for both the savvy investor and the beginner.

4 thoughts on “What The Volatility in the Markets Taught Me in 2008

  1. Al Thomas, you are right on the mark. The Bear is far from over. Several other major shoes to drop (Bond market, Commercial mortgage, States' bailous, Credit card industry, several eastern European sovereign debt defaults.)

  2. Good advice. The trend is your friend. Never allow any big loss. Small losses can be made up, but big ones will kill your portfolio. Last year I made 15% trading and most of it was in leveraged bear funds. The bear is not over. First target is DOW 5,000, but I don't know when.

  3. David is on point, and as far as not carrying your eggs all in basket, Maria is right as well. If you hold all of your assets in the dollar, you have no diversification when the dollar suddenly devalues or eventually collapses. Dont forget -- all fiat currencies eventually fail. When you do decide to enter the gold market do your research on private gold market returns vs. the bullion market -- I think you will be amazed at the previous and current private gold market profits.

  4. I really enjoyed reading this article. Wise words indeed from Maria. I also took the chance to watch the Paul Merriman video which Maria has posted and it was a very interesting take.

    He looks closely at the merits of gold and questions whether it may be the right asset class to hold. He even considers that US T-bills may be a better long term investment than the yellow metal.

    I have to say that while he may have the right statistic comparing T-bills and gold bullion price performance, crucially he says that this is in dollars.

    Of course, the big issue now is purchasing power parity and how much your dollar will buy now and say in 5 years, compared to how many Troy ounces of gold you need to buy real estate.

    With all the paper being issued by the Federal Reserve and a strong possibility that paper will need to be printed (quantitative easing), then we must expect a serious surge in inflation down the road.

    We will likely see a much weaker dollar and so in this scenario, gold will do very well, and help preserve your capital.

    I heard Jim Rogers recently say that he still believes that commodities are the only real unimpaired assets, and in the context of this discussion, that precious metals are going to be the place to be.

    Just think about it. The amount of gold on the earth is limited, while you can print as many T-bills as the Fed decides. Which do you think will have greater value over the long term?

    So, perhaps it would be good to have both Jim Rogers and Paul Merriman discuss this subject in the same room.

    On balance, I believe we need to diversify assets and investing in gold should still play a key part in stabilising a portfolio in volatile times.

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