newsletter
Basic Fundamentals
December 2008
“This time is different” are
among the most costly four words in market history.
Sir
John Templeton - March 1994
We seem to quote Sir John quite a bit, particularly in tough times, probably because we can always use some words of wisdom to keep our emotions from overriding our intellect.
Included with our newsletter this month is our KMS Winter Client Quarterly and a piece from Franklin Templeton*, both of which we hope will provide a little perspective and help your intellect keep your emotions in check.
One reason there’s such an extreme degree of bearishness and pessimism in the minds of investors right now is that most people today have nothing in their own experience that helps them relate to the current market decline. I (Jim) have been here before. Bear markets have lasted this long before, well managed mutual funds have gone down this much before and shareholders in those funds have survived and prospered.
While each economic market and financial crisis is different from previous ones, in their differences, there is commonality. Mainly, each crisis is characterized by its own new set of non-recurring factors, its own set of apparently unsolvable problems and its own set of apparently logical reasons for well founded pessimism about the future. This one is no different.
Let’s review some financial
planning fundamentals. In good
times and bad these are basics we all should be doing:
1.
Set goals and objectives. Long-term and short-term, financial, physical,
spiritual and social. Reduce these to writing, look at them often and review
them for revision once a year.
2.
Establish a family budget and stick to it.
3.
Pay yourself first, save at least 10% of everything you
earn.
4.
Have an emergency fund that is liquid but still earns
reasonable interest and establish a sinking fund for major purchases (i.e. home
improvements, automobile, college, vacations, etc…).
5.
Don’t put anything on a credit card that you cannot
pay off in 30 days, never pay interest to a credit card company.
6.
Never buy a wasting asset on credit.
There’s an old saying “When the going gets tough, the tough get going”. That’s one of the things that make this country so great and the free enterprise system work so well. During tough times like we’ve had this past year…
1. Revisit your budget. Make cuts where you can. Do whatever you can do to reduce your spending
until the good times return.
2. If you’re taking withdrawals from your investments, do what you can to minimize those withdrawals so that you’re not liquidating assets when the market is depressed.
3.
Don’t make hasty or emotional changes in your
investments. Wait for the markets
to return to a more normal cycle and then revisit your investment strategies
and asset allocations.
4. Step back, take a deep breath, and thank God for all of the blessings that we have in our lives - family, friends, prosperity and individual freedoms unprecedented in the world.
The holiday season is an especially good time to reflect on all the things we have to be thankful for and we are thankful to have an incredible group of clients.
May your holidays be filled with joy and good cheer and here’s to a happy and prosperous 2009!
*Please
contact our office if you would like to receive a copy of the KMS Winter Client Quarterly and/or the Franklin
Templeton piece referred to in this newsletter.
Securities
through KMS Financial Services Inc.
520.884.7550
jpw@financial-architects.com brienne@financial-architects.com
3971 E. Paradise Falls,