Sunday, March 8, 2009

My Year of Hopefulness - My Best Investment

A lot of my friends and colleagues are talking about getting into the world of trading stocks for the first time in their lives. While they've invested in mutual funds, 401Ks, and IRAs, most of them have never actively traded stocks through a broker or services like e-trade or Sharebuilder. With the bargain basement prices on Wall Street, some of them are considering taking the plunge, at least in a small way. Heck, as of Friday, you could buy a share of GE for $7. That's less than the cost of a pizza! Why not give it a shot and see how it goes?

I completely understand where they're coming from. And their enthusiasm for this idea has had me thinking about doing the same thing over the last few days. I am in an extremely fortunate position during this recession, and I am grateful for it every day. So why not dip one toe in the turbulent waters of the stock market?

As I was cleaning my apartment this afternoon, I was having a monetary conversation with myself - this is what happens when you are the only source of both the income and expense in a household of 1. Should I pay off my student loans? (Much to my dismay I could not deduct a single penny of the interest I paid on them in 2008 from my taxes.) Should I save for a down payment on an apartment? (NYC real estate is going for historically low prices at the moment and unlikely to recover any time in the near-future thanks to the exodus of bankers and their salaries.) Should I just sock it away in cash for a to-be-determined investment? Should I consider the stock market? Should I continue to invest in my 401k since I no longer have a match by my employer?
After a while I talk myself in circles during these conversations and I end up right back where I started, which is usually without an answer. And then, one bright, shining thought surfaced to the top so clearly that I surprised myself.

Yes, GE and other large blue chips are down to a point where I could actually afford to buy a block of shares. Real estate has always been at least a decent investment.
However, the paradigm is shifting. While yes, we used to investment in big companies because of their stalwart nature, we are seeing them whither like never before. We are beginning to see the waste and excess that so many have taken as a given for decades. It is possible that there is a small business out there, a start-up, that would be a much better long-term bet in the new economy, and maybe that start-up is me. Let's face it - that age-old assumption of compounding interest rates at 8% to 10% may no longer be valid and these stocks that are so far down may actually be not only down, but out.

What is critical is my freedom, and my freedom will always be my greatest asset. This means that my best investment is me, and that means reducing anything that reduces my ability to be flexible at every turn. End of monetary discussion with myself, once and for all.

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Minneapolis Real Estate said...

I enjoyed your post. I know an estimated 1 Trillion dollars left the capital market and went into real estate towards the end of the 90's and now here we are in maybe the best time to buy real estate in 20 years. I know here in Mpls many people have pulled all their money out of the market and are plunging into real estate.

Christa said...

Hi there! Thanks for reading my blog and posting your comment. I agree that this is a great time to buy a home if you intend to live in it for a while. It's amazing what you can get for your money now!