As the most serious U.S. financial crisis since the Great Depression plays itself out on the national and world stage, local financial advisers say there are reasons for caution but also reasons for optimism - and they want people to remember that great opportunities can spring from times of crisis.
"This crisis is creating many very good opportunities to buy and invest now," said Steve Hansen, a certified financial planner with Pine River Investment Service. "That doesn't mean you charge in without really checking out what you are buying, conducting due diligence - but if you do things right, two or three years from now you could come away from this with a huge benefit."
Hansen said that, technically, the United States is not in a recession yet, although he thinks one is coming. But he said there have been plenty of recessions before, and both citizens and businesses know how to ride them out.
"Typically, a recession lasts nine months," he said. "One of the good things about this situation, though, is that businesses have known this is coming for a long time and they have had a chance to prepare for it. They have good lead time on it, so they can adjust."
Hansen said it's more important than ever to sit down with a professional financial planner or money manager both to "calm your mind" about your investments, and to see what a professional can do to help you take advantage.
Hansen also points out that this is a recession different from others.
"Every recession is different," he said. "This one is a lot like 1987 and the collapse of the S & Ls. This is primarily a crisis in the financial sector, but many other parts of the economy are generally sound."
But citizens on Main Street here in the lake country are expressing a wide range of opinions and emotions, from a bit of fear and a lot of uncertainty, to a cautious confidence that things will get better, eventually.
Kimberly Brzezinski is a real estate attorney in Crosslake just starting her career, and she says the whole situation is "a little unnerving."
"The biggest problem for me is that I don't think our lawmakers are explaining the situation to the public enough," Brzezinski said. "The government needs to do a better job of working with the public, and making a greater effort to tell us exactly what is going on and why we need the bailout."
New to her job with real estate at Thomas Associates in Crosslake, Brzezinski says she is only at the very beginning of thinking about her own investments for retirement and the future, but she thinks the economy will "straighten out in the long run."
Financial adviser Laurie Fitterer of Edward Jones in Nisswa says that while the current state of the economy and the markets are in transition, it's also creating tremendous opportunities for investors.
"We're cautioning people about what they hear in the media," Fitterer said. "We have had 31 bear markets in this country, and 31 recoveries," she said. "There are also a lot of terrific opportunities, a lot of value out there, a lot of great buys."
When tough economic conditions batter companies, their stock values may plummet, making them low-cost buys. The majority of companies who experience even extreme devaluation of their stock tend to recover, however, to grow their business and the value of their stock.
For example, consider that 25 years ago the Dow Jones Industrial Average was about 1,500. Today it is hovering around 10,000. Historically, the long-term trend of combined stock values is upward. That means those who buy stocks, and stick with them over the long term, will almost certainly see their investments grow.
However, while the overall stock market trend is upward, individual stocks may increase in value, decrease in value, or sometimes fail completely. That means investors who buy a wide variety of stocks - and other investment instruments - will increase their chances of growing their investment because if some of their stocks lose, most other will gain and more than make up for any losses.
"My advice to investors is to be appropriately diversified," Fitterer said. "You also need to pay close attention to your investments. Don't just ignore your 401K or your IRA portfolio. Seek professional help with your investments, and keep on top of what is happening with it."
And yet, sometimes, a little time-out from looking at your portfolio may be the psychologically healthy thing to do - at least that's what long-time investor and stock market player Donna Evans suggests.
Evans is a self-employed Web site designer from Merrifield has been dabbling in stocks and other investment vehicles for about 20 years. She says you just have to grow accustomed to the fact that sometimes your investments take a dive.
"Just don't look at it if it worries you," Evans said of investment portfolios. "It's an emotional thing for a lot of people, but you just have to remember that you're in it for the long haul, and that, what goes down usually goes back up again."
Evans suggests that people educate themselves as much as possible about investing. She reads Kiplinger newsletter and taps into Web-based resources to stay current on investment issues. Evans also says that she buys stocks based on what you use and value in your own daily life.
"If you're using it, and you like it, then there's a good chance that a lot of other people are using it, so it's probably something that is selling well and has a good future," Evans said.
Evans thinks it's reprehensible that U.S. taxpayers must now bail out greedy Wall Street bankers with taxpayer money, but there probably is no better alternative - a view shared by perhaps most Americans, with the exception of the tiny few who will directly benefit from the bailout.
Tips from the top
As events play themselves out on the world and international stage, there is much the average citizens can do to make the impact of the recession that is likely to be with us for some time to come. Here are some tips from top financial firms pooled by the National Association of Financial Advisors:
Stop using credit cards, and avoid all kinds of unnecessary debt.
Limit all discretionary spending. Delayed gratification is more important now than ever.
Open a savings account, or start putting more money into your existing account.
Little things count - clip grocery coupons, unplug unused appliances at home to save energy, check the air pressure in your car's tires - it all adds up to more cash in your pocket.
Track your spending. Keep a notebook and write down every penny - every cent - you spend every day.
Set a formal budget based on your income and expenses, and stick to it.
Get creative. For example, you could lower your monthly long-distance phone bill by using the Internet-based Skype, raise the deduction on your car insurance to get a lower rate, or check out DVDs and books from a library, rather than buying or renting them.
Move toward self-sufficiency - plant a garden to grow more of your own food, or consider installing a solar panel to reduce your energy bill. Also, improving your home insulation can dramatically lower your heating and cooling bill.
Not only do all of the above lighten your financial burden, but it can also provide a psychological boost because taking action and being proactive gives one the feeling of being in control - even while what Wall Street and what our lawmakers do seems out of our control much of the time.
