How Bad is the Stock Market Doing?

Beware hype about falling stock market prices! Everything is falling so buy, buy, buy....Not necessarily. The stocks are high so sell, sell, sell...Not necessarily. When thinking finances, take a deep breath, maintain control, and never ever listen to the hype or rhetoric.

The Dow Jones Jumps to 14000

Look at the Dow Jones right now. In one day, it dropped over 360 points. Now look back at the Dow's 52-week low of 10,661 on January 20, 2006. Compare that to the low (not the closing) of the Dow on Thursday, November 8, 2007 of 13,079. The Dow just hit 13,000 for the first time in late April 2007. In July 2007, the Dow hit 14,000 for the first time. In October 2007, it went even higher. Enough already, eventually there was going to be a correction. The previous days closing is showing 13,300 as I type. Buying and selling stocks according to the highs and lows of the stock market will give you an ulcer or surely kill you slowly. Many of us who are very old at all have lost some money on the stock market.

How Safe is the Stock Exchange?

Another stock market crash or Enron could happen, but many "safety nets" are in place to try to prevent them from happening. The stock exchange has reporting requirements for all companies listed on the stock exchange. Check out a company's report and its performance if you wish to buy individual stocks. Sometimes you can buy stocks yourself and sometimes you have to go through a broker. Brokers are required to abide by certain rules, but brokers also usually make their money from people buying and selling stocks. Now, since Enron, companies have special accounting practices they have to follow to prevent just such a thing from happening again. However, I really do not recommend the commodities market unless you are in a commodities business. The trading of commodities is very different from the trading of stocks.

Financial Security

There is always the possibility of the unexpected. That is why the best way to ensure financial security is to diversify. First, after getting out of unsecured debt like credit card debt, diversify your savings/investments. This is not only good for individuals but for all of the United States. Save cash, buy bonds if you like, buy mutual funds, invest in money markets or CDs, save through your company's 401k (especially if they match - but understand the consequences of early withdrawal), invest in land, and/or buy a house (no "interest only" loans / lock in a low fixed interest rate). Try to buy items that you think will increase in value - there are no guarantees, but by diversifying your chances of failure are diminished.

Protect with Insurance

Buying insurance also protects your finances. Health insurance, car insurance, house insurance are all items that you buy to protect yourself and what you have worked so hard to build for yourself and your family. Sometimes these policies do not do all the things that you thought they would do. Understand all your insurance policies before you have to use them. Understand what your insurance does and does not covered, so an emergency will not catch you off guard when it happens.

A Cash Backup

Cash (or liquid assets like a checking or savings account) is insurance in case of an emergency also. If you have liquid assets, they will be available to you when there are no other financial "safety nets" available to you and they are quickly and easily accessible.

If you try to do these things, you will not have to worry too much, about where the stock market is today or tomorrow. It may crash, it may not, but it will not be the worse thing that could happen to you if it does. Normally the stock market goes up and down, but historically it has always gone up.