One thing I like in social media right now are those with real knowledge sharing their experience and insights as it relates to fiscal literacy. Like all media (and advisors) there is good, bad and ugly. The good ones are teaching lots, and one thing they are teaching that may resonate and deliver long term value is the combination of three things to help avoid desperation in finances:
1. Save and invest in what you understand. Don't gamble or speculate. Invest.
2. Avoid panic-selling or emotion-driven decision making.
3. Have sufficient reserve funds to prevent the need for panic-selling
Often the very wealthy make their biggest fortunes buying when some are forced to sell (because they need to minimize losses or generate cash) or panic-sell. Had you invested in the DOW in January 2020, you would have more than doubled your investment by now. Had you NOT sold in October 2019 when markets started to dip, your portfolio would have recovered by August 2020, less than 1 year later. Right now Berkshire Hathaway is sitting on over $381 Billion in cash which is worth more than the market cap of Home Depot, with 475,000 employees and 2,347 stores to put things into perspective. Which means this cash sits waiting idly while it could create another Home Depot, this cash is waiting for opportunity, and more than likely it's waiting for opportunity priced buys.
Panic/emotional/desperation selling causes assets, including homes, to sell for less (often much less) than their intrinsic value fueled by emotion or over-leveraging/risk-taking/gambling. Those with hoards of cash or access to credit swoop in to buy these assets and life goes on. These are the things that minimize the 'bargains':
1. Lots of cash on standby. Currently almost $6 trillion of corporate cash is on 'standby'. Consumers have over $18 trillion in money markets or cash/savings accounts. (With this much cash on standby, should we anticipate big bargains?)
2. Exposing this 'secret', long held by the very wealthy and financially well educated to a wider audience to minimize panic selling. As more consumers become educated, the better.
Educating people to the perils of fiscal desperation and how to avoid it may be the best education of all.
