If you were "diversified" and everything fell apart, does that shake your complacency about asset allocation for the future? Or have you sorted through the alternatives -- including cash or "chicken money" so you're prepared for a return of volatility, or another steep decline?
There will be another decline, of course. It may even be starting now. But if you're planning to retire in America, you'll be much better off investing in America. Remember, going back to 1926, there has never been a 20-year period where you would have lost money in a diversified portfolio of large company stocks, with dividends reinvested. Even adjusted for inflation.
Sure, the economy appears gloomy, with bankruptcies and foreclosures and unemployment all rising. But we've gotten through tough times before. It's just that most people under 50 have no memory of the 1981-82 recession, when inflation was 13 percent, unemployment over 11 percent and the prime rate hit 21.5 percent!
Back then, the Dow Jones industrial average was around 800 -- and no one was predicting a technology boom that would take the Dow to nearly 15,000 in the next 20 years. If you sold out back then, in the midst of that steep recession, just think of the gains you would have missed. Will our next boom be based on something equally unexpected -- arising out of nanotechnology or a newly invented energy resource?
As this October anniversary rolls around, it's interesting to note that the media tend to commemorate the most shocking and negative events. Most people want to celebrate only the happy times -- birthdays, anniversaries, accomplishments. It's in our nature to be optimistic, to believe better times will come. They will. And that's The Savage Truth.