A.K.A., OMG DOW.

OK. It’s no longer funny, right? Today the Dow Jones closed at 7552, the lowest amount since March of 2003. Even worse, the S&P closed at 752 which is the lowest point since APRIL of 1997. That’s over ELEVEN years.

Holy baked rigatoni with cheese and a side salad.

To put that in perspective, in April 1997 Ebay and Yahoo were 2 year old baby companies, and Google.com wasn’t even registered as a domain name. There was no such thing as a “Blog“. I wasn’t married, was still (foolishly) in grad school and I had a whole lot more hair. 11 years is almost a third of my lifetime.

So you might think this is the time when a Cheaplander would scurry into his little hidey-hole to wait out the bad financial weather. Maybe stay underground for a year or two, living off tubers and drippings from the ceiling.

Hell no.

In the words of a favorite hitchhiking author: “Don’t Panic!” (I bet those stickers are selling like hotcakes right now.)

Seriously, this is a time to sit back and CAREFULLY take stock of where you are financially, see if there’s anything to do in order to shore up the foundations, and if (and ONLY IF) you can afford to, continue contributing to your traditional or ROTH IRA.

Before you call me out as crazy on that last point, let me state my opinion. And remember, as with all these things, it’s JUST an opinion. I’m not a financial advisor. (Uh, also, if you’re about to retire - completely disregard everything I’m going to say). There are those who are going to say that at this point you should completely stay out of the stock market. Move everything into bonds, CDs, or even cash. They’ll say that you shouldn’t try and invest until things are not as “volatile”. I’ll give them that, but the thing is, how does ANYONE know when the market will stop being volatile and find a bottom? No one knows. If people knew, I guess there’d be a whole lot more Warren Buffetts in the world today.

There’s no formula, and trying to time the market is useless. So, why invest in a down market like this? It’s not so much you should try and invest more or less when things are “down”. It’s that you should CONTINUE to invest in the manner you were, as long as you are still able to. What I’m advocating is this: Don’t make snap decisions with your finances depending on the market. If you’ve carefully considered your original financial plans, and you feel like they’re still sound, then stick with whatever your original goal was. (Well, I guess if it makes you feel better, you can look at it as if you’re getting in on prices that haven’t been seen in ten years - right?)

I’m going to be honest - I definitely don’t feel jolly about our investments (mostly index funds) being down 50% over the past year or so. Because we’re still young, we actually are fairly aggressive in our allocations. So, for us, most everything is “down” right now. But because we ARE still young, we can afford to take that kind of hit and still keep investing as normal.

The thing is, this is what tolerance to financial risk is about. I think when some people look for investments, maybe they aren’t really cognizant of just what “risk” is. To many, they just look at the percentage returns. They need to know that putting all your money into stocks IS a fairly aggressive and risky approach. They need to know that the possibility that they could do very well is high, as is the possibility that they could lose a lot. Know what you’re getting into.

It’s MUCH better to make this type of risk-tolerance assessment when the Eeekconomy isn’t in the toilet like it is today. That’s all I’m saying: try and make these important financial decisions and plans when things aren’t crazy. The right time to have made a plan for a recession was 5 years ago, when everything was going UP. Making a major change in your investing philosophy when things are tanking is kinda dangerous… if you take all your money out of the stock market, when do you put it back in? Will you wait until the eventual rebound has run past its course (thus missing a potential huge rally) or will you get lucky and “time” it just right?

I have absolutely no idea. I do know that the Cheaplander philosophy is to MOVE SLOWLY by default. We tend to ignore anything that says to “BUY NOW or else you’re going to lose out” because these are snap decisions. Oh hell, of course I buy things on impulse like everybody else - I just save that kind of purchase for the thrift store or 99 cent market.

[Editor’s Note: The above post is probably discombobulated, primarily because I was out on Scottrade shorting all the penny stockz I could today. I hope you did the same because there’s gold in dem der hills. I would also like to disclaim that any “advice” given here is merely the ramblings of an underemployed web-designer who never took an economics class in his life and is known to horde crispy two dollar bills in pillowcases in the closet.]