Surviving a Market Downturn

"This time it's different." It's a statement that's been used countless times in the past, primarily to cajole the unsuspecting into making unwise financial decisions.

In the late 1990s, people were led into dot-com stocks like cattle to market because "this time it's different." Easy credit lured millions of Americans into homes they couldn't afford in the 2000s because "this time it's different."

With stocks experiencing a 10 percent correction and unemployment hovering near 10 percent, is it different this time? The short answer: Not really.

The fundamentals of sound financial and investment planning remain unfettered, like living beneath your means, minimizing debt, and protecting what you have with insurance. As for the market's volatility, remember that you're investing for the long term. Sometimes the best thing you can do is nothing at all, rather than selling at a loss in a panic.

In 2008, during the worst stock market decline in seven decades, investors were warned to flee equities because "this time it's different." Stocks had only just begun to collapse, so the thinking went. Those who bought that argument missed the greatest rally since the Great Depression.

What's different this time around compared to the 1990s, the 2000s, or even last year is that you're that much closer to retirement, if not already there. That's why you need to take control of your financial life. You can't wait for the government to act; it already has, with limited success. You also can't wait for the economy to take off. There are too many storm clouds on the horizon that could derail the recovery.

Take action by realigning your financial and investment planning in order to avoid the problems that may have plagued you over the past few years. There are many straightforward steps you can take (see sidebar) to both take advantage of opportunities while you defend against future adversity. Each action should strive to accomplish one or more of these three objectives:

1. Safety. Safety involves choosing strategies and products that'll offer protection against loss. While many have concluded that there's no place to escape the carnage of the Great Recession, you'll discover that there is.
   
   
2. Simplicity. Simplicity means opting for straightforward and understandable approaches to your finances as opposed to the complex approaches that were favored by so many in the financial services industry. You'll soon learn that "new and improved" is often neither new nor improved.
   
   
3. Predictability. It's crucial during this period of uncertainty—uncertainty that may persist for some time—that you seek out strategies and financial products that provide reliable outcomes. You will be comforted knowing that you'll be able to predict with relative certainty how critical elements of your financial life will turn out.
   

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