Should You Still Be Investing?

by Neil on February 18, 2009

Today while reviewing the papers I came across a few articles that got me thinking. The first of which was that GM needs more money. While this development doesn’t surprise me in the least it does raise some concerns.

Include the fact that many economists think that the US Stimulus Bill was introduced to late to have an effect during 2009 and we have an interesting set of circumstances.

For the past few months I’ve been of the opinion that the present market conditions represent an excellent buying opporunity. Stock and mutual fund prices are surpressed which means that good, solid companies can be bought at bargain prices.

Over the last few months I’ve been advising clients to start buying back into the market. What we’ve seen on a daily basis is up one day, down the next. Eventually, the market will recover it’s a question of when not if. Unless of course we fall of a cliff.

With the news today I wonder if perhaps that cliff is approaching? With GM seeking more money and the possibility of bankrupcy being considered how will the market react? If the stimulus plan isn’t going to deliver until 2010 how will the market react? Is another cliff, another dive in the market approaching?

One thing I do believe when it comes to investing is that the doom and gloom often becomes a self-fulfilling prophecy. When the news media starts reporting on negatives in the market people listen and pull their funds. It’s all about confidence, if everyone thinks the market is going to drop, then the market is going to drop.

If people believe the market is going to go up and they start investing, the market will go up. It’s the same with rescissionary periods. People stop spending because they are worried about jobs, about having enough money. If we keep spending money, we create demand for goods and therefore jobs.

To answer my question of should you keep on investing; Yes, absolutely. I’m not saying dump your life savings in now. I do believe that buying into a balanced mutual fund portfolio on a regular basis is a solid strategy to building wealth.

Time will tell if I’m right or not. However, my belief is that the market is not going to fail. The economy is not going to crash and never recover. To believe that indicates that you have no faith in the western way of life and if these idea’s do come to pass we all have bigger problems to deal with.

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