I am assumed your investments experienced at least a double digit decrease from the last economic downturn (recession) if you were in the market. Now, the economy is rebounding along with jobs, corporate spending and personal earnings. Investments have increased to the same level before the recession or even exceeded its value. What happened? There are numerous speculations but economists have theorized that Wall Street, banks, and we contributed to the issue. My theories were that we had too much hope in Wall Street on that one mutual fund or stock that would have ridden us into retirement sunset. We had more faith in the experts and economists. We also believed that wealth was imminent and it would last forever. I should have known better because the U.S. has had five recessions in the last 30 years. Either way, all of us felt the pinch. I don’t claim myself as an expert of Wall Street however I can claim what the recession has reaffirmed for me.
Getting rich quick is not a solution for long term viability (Proverbs 28:20) – The get rich plan in investing told us where to invest, how to invest and how much to invest. It worked for a little until the bottom fell out. We saw and experience revenue loss in our federal, state, and local levels when the credit crunch came. Small and large businesses were impacted. Companies could no longer grow; they were too busy trying to save themselves from closing their doors. Individuals had trouble paying for basic expenses because companies were reducing the workforce and salary therefore life savings and investments were swallowed up in a matter of months. Lesson learned: Become a careful investor with a long term outlook that gives you steady growth.
Don’t put all your eggs in one basket (Ecclesiastes 11:1-6) – The recession taught me that having money in one place may not be a good thing. Diversification becomes a priority. While stocks and mutual funds took a beating, bonds were used to stave off further portfolio decline. Lesson learned: Complementing market driven investments with personal savings, money market accounts, bond funds, and insurance products that has an investing component.
Wealth is not guaranteed (James 4:14 and Proverb 27:24) – Good years will come as well as the rough years. There have been at least five recessions in the past 30 years (one or two in every decade). It lasted an average of five months with average unemployment rates at 8%. The Dow Jones just hit 15,000 points. What does this mean? I am not sure but I do know by looking at previous recessions that stocks grew in value then decreased prior to entering into a downturn. Lesson learned: Take it in stride, continue to invest and know that we are not in control of our economic fate and wealth is a gift from God.
God owns it all (Psalm 37:4) – The market and economy cannot be predicted. No one predicted the last five recessions. I do know that God owns it all and we are to become stewards. We do not know when the next one is coming but we should prepare for anything to happen. If we understand the purpose of our finances (investments), the next recession will not impact us. Lesson learned: Become a steward of God’s resources not only for yourself but for your legacy.
This is what the recession has reaffirmed for me.
Make it a great day!