Looking back over the past few years, one thing is certain - we can never be absolutely sure what the financial markets will do at any given time. We can study charts and graphs, both historical and forecasted, we can consult with economic experts, business leaders, and government officials, we can look at inflation and interest rates, and still we cannot predict the markets with absolute certainty
If you are a prudent investor, then you have a financial retirement plan that will ensure you have sufficient funds for the lifestyle you envision after you stop working. What constitutes sufficient depends on your ambitions and your hobbies, and also on how long you live. People are living longer, and it's not unreasonable to think that you could live into your 90s.
During any given time period, either greed or fear drive investment prices up or down depending on the mood of the majority of investors. During 2011, various global events have continued to weigh on investor confidence as the world watches and waits for the U.S. economy to regain it's prominence as the world's primary engine of growth.
As more people are beginning to regain their financial footing after the recent economic storm, many are reassessing their financial strategizing and wealth accumulation plans with greater intent on getting it right this time.
If you are like most people, you have been brought up to believe that you should lock your money away in a reasonable yielding investment to allow compounding to increase your initial deposit over the years and give you a valuable resource for your retirement.
During financial crises, stock prices suffer. However, they typically recover over time.
This chart illustrate the cumulative returns of a balanced (60% stock/40% bond) portfolio after five historical financial crises. In the short term, uncertainty from such external shocks can create sudden drops in value. For example, the portfolio posted a negative return one month after the October 1987 stock-market crash. Over a longer period of time, however, returns were much more attractive, and investors who stayed the course reaped considerable rewards.
Can society's elders teach the young anything? History often dictated the young had to experience disaster for themselves before believing they were heading into it. This has frustrated many parents. But the enormity of the 2008 financial collapse may provide the lesson and opportunity to steer the young in the right direction.