Saturday, October 15, 2011

Is it Different this Time?

"This time is different." ~ adage about financial situations
In the past decade, I've heard the comment, "This time it's different." numerous times.  For the Internet stock bubble.  For the housing bubble.  For offering or using risky no money down mortgages.  For taking enormous student loans to attend college.  For using one's home as an ATM.   In all these cases, it was different for awhile  
Eventually, time proved that it wasn't different.   The Internet stock and housing bubble popped.  Risky no money down mortgages were a significant factor in the financial and housing crisis.  Many recent graduates have significant student loan debt and are unable to find jobs.   Almost 30% of homeowners have underwater mortgages.

Now, "This time is different." seems to apply to investing in the stock market.   Many people, including me, have taken money out the stock market.   People are investing in bonds or cash equivalents, even though interest rates are very low.  Perhaps, this time is different :-)   More than likely, it is not. 

So the question for me is not if, but when to get back into the stock market.  While I believe the market will be higher ten years from now, I need to be more cautious about market volatility since we're currently retired. Currently, I still think the downside risk of the market is still relatively high.  So my plan is to wait until after October 31, 2011 (the deadline for EU bank recapitalization plan) and  decide if the market downside risk is reduced. 
For more on  Reflections and Musings, check back every Saturday  for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

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