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.