Why do we do what we do, Part #3

Well, folks, I hope you have started back at my very first blog and are now up on the power curve of my thoughts. As I write this, the stock markets (world wide) are crashing and ours is obliged to do the same.

The people may not have to power to make the hard changes politically to drag jobs back to our shores, but they do know that they are losing their hard earned retirement money and savings as the markets keep on diving. Sad to say I am right in there with them. What little my family has saved is slowly swirling down the drain. We have two choices, sweat it out and hold what you've got, or SELL, SELL, SELL....the latter is usually the worst thing to do, but I fully understand if panic sets in. IN fact, by having a small stash of cash in you accounts, the time to buy is usually after the smoke clears and the markets bottom out.

I hope that you guys have put a good deal of your savings into treasury strips (small parts of Treasury bonds) or at least into blue chip bond funds, which, while they will fluctuate in price on a daily basis, if held to maturity, will pay off. Good luck if you haven't done this.

Unfortunately, most stock brokers have forgotten the basic principals of their craft.

I call to mind the pyramid of investing. The bottom (the broadest (and largest) base, should have to most secure and safest investments, then on top the most risky and smallest part of your investments. Most financial "experts" have totally forgotten about this.

All NASD licensed registered reps. are taught that they MUST do what is in the investor's best interest...and to stay within their (the customer's) risk tolerance. But in actuality, they (brokers) usually want the investor to risk a larger portion of their accounts (be that a retirement acct.or basic stock purchase acct.) that will give a higher yield (while at the same time involve considerably more risk). Sad to say, We Americans are the world's worst investors and savers.

We usually wait until the last possible minute to start saving and therefore are almost forced into risker investments to reach their investment goals. My advice is to stick with the fundamentals and don't get greedy. Start saving with your first paying job....even cutting grass. Put some small portion aside.....you'll be glad you did.

Also, as the investor gets older, their ability to re-gain or re-earn losses in investments is reduced, therefore they should be investing in more and more secure investments. These probably won't be as exciting, but are far more likely to be there when needed. Every few years every investor should (I could say,"MUST") reevaluate their investments to determine if the investments are still within their new more conservative risk tolerance. There are lot of smart investors that almost never do this.

If you haven't read my first two blogs, I highly recommend you to check them out, and just possibly you will have a greater understanding of why we are in a financial crisis and at least one idea of how we could get out of this.

My best to you all.

HSD