Uncertain times: Protecting your assets in a 'fickle' economy

July 1, 2008

As I write this, millions of Americans are straining under the pressures of a fickle, unpredictable economy. Tens of thousands of workers have lost their jobs in recent months, savers are struggling to make sense of the lowest interest rates that some have ever seen, and the stock market has given new meaning to the word "volatility." All of this while gasoline and food prices surge to record highs.

Key Points

As I write this, millions of Americans are straining under the pressures of a fickle, unpredictable economy. Tens of thousands of workers have lost their jobs in recent months, savers are struggling to make sense of the lowest interest rates that some have ever seen, and the stock market has given new meaning to the word "volatility." All of this while gasoline and food prices surge to record highs.

On March 24, 2000, the Standard & Poor's (S&P) 500 index of 500 large companies closed at 1,527. At press time, it's struggling back and forth at about 1,388, marking a 9.1 percent decline from its peak over six years ago.

The National Association of Securities Dealers Automated Quotation System (Nasdaq) index that primarily tracks technology has fared more poorly still. It stood at its all-time high of 5,048 on March 10, 2000. At press time, it's idling at about half that, frightening NASDAQ investors with catastrophic paper losses.

Obviously, if you're a stock investor, your endurance and mettle have been tested in recent months. For many, the patina of America's equity marketplace has been tarnished.

To make matters worse, the subprime mortgage mess has put thousands of Americans at risk of losing their homes through foreclosure. It's no wonder, then, that despite all of the world's ills, most people put money concerns at the top of their worry list.

In a recent survey, more than 60 percent of respondents said that they are concerned most about their financial future.

Optimistic outlook

So, in view of all that's happening today, why should you have reason for optimism?

For good reasons, I believe. In times like these, we can only look to history for some guidance.

Perhaps the most important lesson that we can glean from America's past is summed up in the biblical phrase "This, too, shall pass."

And pass it shall.

As it has every time it has been challenged with adversity, America will eventually prevail. And when it does, personal finance will once again assume the rosy glow to which most Americans are accustomed.

Lessons from the past

Consider how our financial world fared after some of our most serious modern crises.

After what appeared to be catastrophic drops in the stock market, here's what happened during the six months immediately following the event:

In each of those examples, the market rose to even greater heights in the following decade. As these figures show, opportunity and reward have customarily followed calamity and disaster in America.

As we are often reminded, what has happened in the past is no guarantee of what will happen in the future - but that's hardly reason to turn our backs on the lessons history tries so valiantly to teach us.

While concerns about money may seem prominent to some in the middle of this difficult time, to others the present situation offers a unique opportunity to amass great wealth.

Super-billionaire J. Paul Getty once observed, "Buy when everyone else is selling, and hold until everyone else is buying." This is not merely a catchy slogan. It is the very essence of successful investment.