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No, this entry isn't about the 25 cents quarter, but rather a quarter of the year, more specifically from March 5 to June 4, 2009. The media continually blares how bad the national economy is, national car manufacturers are declaring bankruptcy, dealerships are told they no longer have a franchise.... Gloom and doom abounds. Only if you believe it. I'm working on some home finances and keeping up with my records using Quicken software. I own some stocks that I participate in their dividend reinvestment plans (DRPS) so I'm trying to update my holdings. In March, each share was worth $16.16 and as of June 4 those shares are now worth $36.98 an amazing 129% gain in just 3 short months. Its been said that, "figures lie and liars figure." First off, that 129% gain is just for a quarter so you could multiply by 4 to get 516% annual gain if you follow the figures lie and liars figure model. Also I didn't buy at the $16 level but several years ago at $45.45 so my value is still less than I paid and the $36.98 is about where I was November 19. If I could have predicted the market, I should have bought many shares in March. Why didn't I? Well, I can't predict the future so who knew this particular stock would make such a strong comeback. I DO know that my mortage interest rate is 7.25% - a sure thing and because this is a newer mortgage, most of my monthly payments go toward interest. So in addition to the monthly payment, any "extra" money I find goes to paying down the principal which results in a significant reduction in the next months interest amount.
This past tax season I helped an older couple who, after watching the value of their retirement funds decline, liquidated their holdings, not only missing out on a rebound, but shifitng themselves into a higher tax bracket by moving so much money. Yes, their investments had lost money, but possibly it hadn't lost as much as they thought. If they, like you, participate in a employer sponsored defined contribution plan, each month they made purchases regardless of what the PRICE of the investment was, Going back to my example of my DRP. Each quarter, the dividends are reinvested to purchase more shares or in my case fractional shares of the stock. If the price has dropped, I get more shares. As the price rises, my dividend purchases less. So over time, the value of your holdings does fluctuate based on market performance and how much you contribute. So while this couple cashed out at say $75,000, they may have seen their value drop from a high of $120,000 but may actually have purchased the investments over the years spending a total of $50,000. Depending how you interpret it, when they cashed out, they didn't LOSE money, they gained $25,000! As they saw it, they LOST $45,000, the difference between the $120,000 high and selling price of $75,000. They say hindsight is 20/20. If their retirement fund performed like my stock (NOTE: not recommended to keep all your $$$ in a single stock!) today their retirement fund would have rebounded to $96,750.
Bottom line message: keep your perspective on your finances. Work to defeat debt and build wealth by using the various types of savings and investment strategies for the purposes they are best used for. Have an emergency fund of 6 to 9 months of living expenses in a relatively liquid account, contribute to your employer sponsored retirement plan at least to the level of their maximum match.