In the Wake of Disaster

Earthquakes and a tsunami in Japan, revolution in the Middle East and North Africa, unemployment and too much debt in the rest of the world – is this how the world ends?  Or is this just a continuation of an endless schedule of disasters?  Is this time any different from the past?  And what are the implications for you and your financial future?

For over 200 years, investors have weathered a continuous stream of disasters, mayhem and bad investor behavior brought about by the human emotions of fear, panic and greed.  Fortunately, over the same time period, the hard-wired desire of the human race to improve their and their children’s lives through individual freedom, sacrifice, innovation and hard work has had the effect of improving living conditions and the world economy all around the globe.

It is important to keep in mind that in the middle of chaos and disaster comes the opportunity for improvement and growth.  We learn from our mistakes and make positive changes in an attempt to avoid those mistakes in the future.  Sometimes this works and sometimes not.  But the idea is that these improvements, when taken together, move the condition of the human race incrementally forward.

Over the last 200 years, and more importantly over the last 50 years, wealth has been created at an astounding rate.  In the face of breathtaking disaster, fear and panic, the world economy as measured by the earnings of the world’s multi-national corporations, has grown at an astounding pace.

We have lived through times significantly worse than at present.  In fact, the standard of living around the globe has never been better.  And the rate of improvement is accelerating - in spite of the continuous stream of disasters-of-the-day.

What then is the appropriate strategy to improve your financial position?  Stop trying to guess the timing of your investments.  You can’t, and no one can.  Fight your fears and take advantage of temporary drops in the market to increase your holdings of those multi-national corporations.  Own at least a hundred different companies all around the globe.  If you don’t have the time or money to own individual stocks, own several mutual funds to get the proper diversification.  Buy when you have the money and sell only when you need the money. 

And turn off the TV.  They’re only talking about the latest disaster and nothing good can come from watching and worrying about it.  Better to read a book to a child and spend time improving our collective life experience in the time we have left in this world.