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Good News Doesn't Always Travel Fast!
| Published: 31st August 2008 13:54 |
Prices are going up, food, petrol and most of everything costs more today than it did just a few months ago. Share values are falling, mortgages are scarce and rates are rising. We all have less in our pockets to spend and things are getting worse!
This is the story of doom and gloom that sells newspapers and gives newsreaders something to talk about. These difficult economic times come around regularly every few years, sometimes worse than now, sometimes better. The cynics out there might say that mysterious Machiavellian manipulators in the city are exacerbating the situation to make money. But what can we, as individuals, do about it?
Well in a nutshell, not a lot!
Socially we tend to like bad times; just listen to what everyone is talking about, it's not generally the good news. Difficulties do seem to bring us together and isn't it great to have a jolly good grumble and get it off our chests!
If you are an investor and you see the value of your money fall, then the loss is only a paper one. If you can hold out for a few years, markets come back and values improve. Should you need to spend the money however, you might have some difficulties.
If you are looking for a simple answer it would be ‘ride out the storm'. Of course the best course of action would be to prepare for the bad times during the good ones. That's easy to say after the event, something else we are good at.
There is no easy solution for those who have been caught out in the current downturn but there is a great lesson for the rest of us. Planning ahead, risk reduction and well considered use of your money are all essential if you are to avoid the pitfalls of financial life.
No one can make any guarantees but by following three simple rules you can stand a better chance of easing future problems.
Rule 1
Never invest in anything you do not understand.
If it sounds too good to be true it probably is, always read the small print and ask plenty of questions.
Rule 2
Spread your risks.
Do not put all your eggs in one basket; shape your portfolio to suit your attitude to risk. Get an understanding of what ‘risk' means and protect yourself.
Rule 3
Keep sufficient cash available at all times.
Plan ahead for cash flow and make sure you can get hold of money when you need it.
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