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Yes, 2008 was ugly….but what are you going to do about 2009? December 30, 2008

Posted by shaferfinancial in Uncategorized.
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For passive individuals, 2008 was a very scary year.  It seemed there was danger everywhere.  From massive layoffs, to a greater than 40% drop in the S & P 500 stock index, to drops as high as 30% in real estate values, and the $50 Billion ponzi scheme of Madoff,  the financial news was ugly.  There was no where to hide, yet folks did indeed try.  Looks like mutual fund investors could have been better off putting their money underneath their mattresses for the entire decade!  In case you hadn’t noticed, the obituary for the passive investing tribe was written this year.  All those smart physics graduate students that ended up working on Wall Street, and then went on to tell the individual investors that their only chance was to buy and hold index mutual funds have now seen the failure of their advice.  The very same math models they used to give individual investors advice, were used to give risk advice to Wall Street firms on the derivatives they designed.  How that work out for folks????  All the while folks like Warren Buffett and George Soros (along with literally hundred of thousands of smaller investors) used commonly known investment strategies to dramatically beat the market performance over this decade.  They did this investing in real estate, stocks, options, commodities,  currencies, etc.

Now here is a question for the good readers of UFW.  Who is happier at the end of 2008, mutual fund investors or folks like me who have taken control of their finances from the so called experts?  Now it is true that my portfolio is down this year, but it is down nowhere near that 40% number for the stock index.  However, there is something comforting about looking in the mirror and knowing that the person you see is responsible for beating the stock index by over 20%!  And there is something wonderful about watching your wealth go from negative to seven figures in the course of 10 years.  The internet is a wonderful world  and I get contacted by many people.  I have talked to scores of people who have had the same experience as myself by taking control of their finances, so I know I’m not a lone wolf out here screaming into cyberspace!  And by talking with all these folks, I know that no matter how well or poorly they did in 2008, they are all looking forward to 2009 with wealth building plans in hand.  How about you?

The last week I have been posting on psychological factors that affect our financial lives.  Here is perhaps the most important one I haven’t mentioned; confidence.  Not overconfidence as anyone that has done even a small amount of investing has been humbled by the market at times.  No, just plain confidence obtained by taking control from others what you were fearful to do for yourself.  Those with confidence do for themselves and happily live with the results.  Those that lack confidence trust others to do it for them and find themselves very unhappy at times (like now).  I have clients in a variety of financial positions.  Some are getting themselves out from a mountain of debt, others from bad investments, others are trying to figure out how to get control of their wealth from their jobs 401Ks.  And of course some are further along, investing in real estate, stocks, options, businesses, etc. and setting themselves up for a successful 2009.  I ask all of them this question; are you excited about 2009?  Emphatically, they all are.  Yep, confidence is a great trait to possess.  As my friend Alan says, become the CEO of your money.  And I add, NOW. 

Here’s to a great 2009 for all of you!

Yours in wealth creation,

David Shafer, Ph.D.      

CEO of My Money!

CEO of My Money!

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