Now is a good time to reflect on the topsy-turvy economy of 2011.
You may want to forget the past year if your portfolio declined or you lost your job. But you can benefit long term by learning valuable financial lessons from the year that’s ending.
Sheryl Nance-Nash of dailyfinance.com has identified six big economic lessons of 2011.
1. The up-and-down economy isn’t over.
“This year on Wall Street was a wild financial ride,” she writes. “Turmoil on the global political and economic scene continues to feed a high degree of uncertainty that is likely to be the new norm. If you’re planning to stay in the market, make sure you have the stomach for it.”
2. Don’t fret over today’s developments.
“Despite all the headlines and daily gyrations that can inspire irrational moves, investing is a long-term adventure,” Nance-Nash continues. “You’ve heard it before, and you’ll no doubt hear it again: Save and invest for the long term.”
3. The global economy matters.
“Years ago … it didn’t matter what other countries were doing,” says Wayne Copelin, president of Copelin Financial Advisors. “That has changed. Today, if you get a meltdown in Europe, that directly and indirectly impacts us.”
4. Politics affects your wallet.
Political gridlock has contributed to the nation’s credit downgrade. “We’ve seen more than any other time, how political decisions impact capital markets,” Copelin says.
5. Watch your finances more closely.
“With the economy stuck where it is, there’s no margin for missteps,” Nance-Nash writes. “You have to mind your pennies – whether it’s switching banks for better fees or dumping mutual funds with high fees for a no-load fund.”
6. The U.S. is still a good place to invest.
Despite some dire economic news, U.S. Treasury securities have generally performed well, Copelin says. In addition, most municipal bonds have produced acceptable returns. “If nothing else, 2011 was a case study in how financial markets have a way of confounding popular sentiment, the expectations of the investing public, and expert predictions alike,” Nance-Nash writes.
Instead of bemoaning the unsteady economy of 2011, learn from it. Savvy investors look to the future, armed with knowledge from the past.