Mutual Funds and other Cruise Control Investing Strategies may no Longer Cut It
It used to be that if the analysts called it a burst bubble, or a recession, or an economic slowdown, all you needed to do was hold your breath and hunker down, while it played itself out; and pretty soon you found things were on the mend. Those were the good days. Now though, booms, busts, bubbles and recessions are just as regular as the waves that rock your boat. If you want to hunker down, you might as well make yourself getting comfortable in there. They wipe out your business, leave your carefully planned-out portfolio in tatters, and if you are not punchdrunk already it looks like getting used to being wiped out is one of the best investment strategies to have these days.
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And not without reason too. Even a little exposure to how hedge funds work, shows that there are alarming things in the air. The big banks and the hedge funds have been constantly involved in moving fantastic sums of money out of the country; it certainly points to something. You can't really predict what exactly it might be though or put together reasons investing strategies for it. Just a couple of years ago, it was the housing bust, where people bought too much property they could not afford, with money that was not theirs. Who's to say where the next scare is going to come from? It could be treasury bonds, or investments in South America or anything.
But you don't really need specific information; you can still plan your life on certain all-weather investing strategies that can protect you no matter what. For instance, keeping your debt levels under control, is an ever-popular life strategy. At a time when one of these economic Katrinas is bound to tear through your life sooner or later, a good way to conduct things would be to lower your monthly payments for everything, and to lower debt in general. Picking a fixed-rate mortgage to refinance now would be great. If you have anything left on your student loans or your car loans or on your credit card, it would be best to direct your income towards bringing them down as far as possible. Anything you want to buy, you would be better off buying for cash, when you save up for it.
You're going to have to not plan on any support from anyone but yourself. Everyone who relied on their pensions and their health insurance from GM is beginning to wake up to a new reality. Even government programs like Medicare or Social Security, are just too generous to be able to stay afloat for much longer. Of course it's the government, and they'll keep them in place for long as they can. But the party has to end sometime. So much for lowered expectations. Let's come down to basic investment strategies. You've been doing the disciplined thing over the last ten years - you spread your money out among all the respectable low-cost mutual funds, and you did this regularly. There still is not much to show for it, what with the shakeup in the markets.
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If you believe that you need to speculate to accumulate, and want to bet on China or India, or short treasury bills, you just entered a raging debate on whether these kinds of tactical investing strategies might work anymore. It just takes too much knowledge and too much disciplined timing. But then there's really no other choice. The whole theory that you could bet safe, and stay on top may just belong to another era. We live in a time when America may no longer be able to dictate terms in the world. When American companies lose clout and power, investments in them, no matter how safe, may inevitably not do much for you. The way people used to bet safe across a variety of stocks, these days, betting across a range of investment strategies is where it's heading. Try a little of the old method, try a little of the new. Who knows which one will strike?
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