Thursday, September 18, 2008

Cleansing Fire

If you're like me, you've gotten the privilege of watching your stocks drop in value a significant percentage over the last week. Nothing helps to ruin a day like seeing those red numbers come up all over your portfolio, almost like watching your net worth bleeding away.

Unfortunately, I don't have any magic advice to save your portfolio. Instead, I'm going to just sit and ride it out, continuing to dollar-cost-average as I wait for my portfolio to recover over the next couple of years.

I do want to interject some perspective. The linked article talks about how this is just technology starting to creep into the finance industry and how it brings about destructive but progressive change. I like to think of it like a cleansing wild fire. Times change, humanity advances and people's needs change. If businesses don't change with them, then they become like rotting, dead wood, waiting for a spark to set them aflame. The healthy, growing and changing businesses are strong enough to not be engulfed by the flames, and then grow stronger from the ashes of their competitors and the new space opened up by their removal.

The economy is cyclical. It's always been that way and it will always remain that way as long as the basic principles of supply and demand remain true. We are in the midst of a down cycle. It was going to happen eventually, despite the government's best efforts. Things are going to be very different from the up cycle we are all use to, but that doesn't mean that the opportunities are gone, or that the new challenges presented cannot be overcome. It's just time for us as individuals to shift our thinking and adapt, much like the businesses have to. Just make sure that you aren't stuck being dead wood.

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