You and Your Money: When Economists Get It Wrong

By Martin Brown

money spilling from red purseBuyers beware: economists, financial analysts, money columnists, personal business advisors, and all get it wrong now and then. In fact anyone who predicts the future direction of the economy is doing little more than taking an educated guess, and I’ll happily include myself in that category.

The important thing to keep in mind is that in the final analysis the money you worked hard to earn is yours and whatever spending, savings, and or investment decisions you make will be yours to live with happily or not. If your stockbroker were spot on in all of her assumptions she would not be taking your call on any given afternoon, rather she’d be hanging out at the Prada shop in Beverly Hills trying on jackets that cost more than you earn during an entire year.

If you are truly concerned about investing wisely you should never listen to just one pundit, one economist, one stockbroker, or one friend who has succeeded in business. You should gather information from several independent sources.

To prove my point you need to look no further than the tumultuous financial markets of the last few years, not only here in the US but around the world. This recession is packing a harder wallop than most economists ever saw coming.

And so the question: What can you do right, when it seems like all the economists are getting it wrong? Short of burying your money in a waterproof box in the back yard or stuffed in your mattress, hopefully not in a part of the country subject to wildfires, probably the safest place for your money is in US Treasury Notes. The only problem here is that as the markets start to recover you’ll be wondering why everyone’s return on their investments is doing so much better than yours.

If your approach to investing your hard earned savings can be summed up in three little words: “Trust No One,” then your best approach is to diversify into well established paths such as an index fund that broadly reflects the New York Stock Exchange, institutional certificates of deposit, through a banking institution, or treasuries, and possibly a mix of state and municipal bonds, and broad based funds in such areas as emerging technology stocks, pharmaceuticals, or healthcare.

Any time that the economy takes a dive the most likely of those to be badly wounded are the individuals who had all their proverbial eggs in one basket. No matter what the advice, and no matter who the advisor, a well-balanced financial portfolio is always the best approach to investment especially in times of financial uncertainty.

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