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March 30, 2009
In order to prosper in your financial life and get through this economic environment with the greatest peace of mind, you must rid yourself of any short-sighted thinking that may negatively impact your financial life.
Every major downturn has its own unique characteristics. This frightens investors into making the wrong decision at the wrong time. For example, over the past 18 months I've witnessed investors dump their stock market holdings regardless of how well-managed the companies might be.
A classic short-sighted decision.
"But Roland," you say. "Shouldn't you move more of your money over to cash until you know the market recovery has arrived? Isn't that the safe thing to do for now."
Nope, and here's why: For 95 years now the Federal Reserve has destroyed the buying power of our dollars. With the massive amount of money that's been created in recent months, I expect inflation to continue being the dominant, long-term trend throughout my lifetime.
Cash is the LAST place I want my long term savings to be. For more on this see my previous posts on derivatives.
Knowledgeable investors I know realize that putting money in the bank today that could buy a loaf of bread will one day be given back those same dollars but this time they will only buy a few crumbs after inflation has taken its share.
See, there is a difference between money and wealth. Money is just the tool society uses to measure and trade wealth. The true wealth: businesses, stocks, land, real estate, and precious metals cannot be created without limit; money can.
My suggestion is that you recognize the difference between the two and if you have not done so already, start dipping a toe into the market by taking money and buy up the abundance of wealth that so many of your peers are ignoring.
Here's one last bit of common sense that explains why now is not the time for cash:
FINAL NOTE: I could be wrong but the chance we saw the market bottom back in the early part of March grows by the day. Don't get too excited yet because the windbags in Washington could quickly change that with a speech or a new piece of legislation. But please stay tuned - the remainder of the year will likely be filled with many twists and turns.