Monday, December 17, 2007

Ben Stein’s Advice

I have always been a big fan of Ben Stein. Not only is he very well educated, he has tremendous wealth of knowledge from working in the White House to being on MTV. He is a frequent contributor to Yahoo Finance and in these down market times he has this word of advice.

In the long run, if you can ride through the slumps, your investments will almost always pay off. Many of us in this market are stuck in a liquidity crunch. Either too many of us had put our money into realty stocks, or many of us had just put all our money into houses themselves. This scenario will potentially cause you to have to sell their investments when you don’t want to - during a market correct and/or slump. Otherwise, what will you do when you have a liquidity crush (i.e. need money for an emergency when most of them are tied to “fixed” assets)?

In order to avoid this predicament, Ben says it is always wise to have a sizable pot of cash or near-cash (translation: money market funds) so you can ride out slumps in market for stocks or anything else you’re in – whether it’s for a surgery, your child’s college tuition, fixing your car, or any other related matter.

In conclusion, if you are prepared, with some money set aside for emergencies, this is the best time to buy into investments. I have always been puzzled when I read about advisors warning against buying into the market when stock prices are down. In fact, that is the best time to buy that house you always wanted or invest in the market. If history is a predictor, the people who buy and hold in this scary time will be well-paid for their efforts.


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