It would be a lie to say that I understood what was going on in the financial markets. From the outside it looks like a lot of very smart people made some very stupid decisions. Maybe they just acted smart and they thought that they were untouchable. In case you've been completely out of touch for the past few weeks, the stock market dropped over 500 points yesterday on the news that 2 of the major brokerage houses on Wall Street were in trouble. Lehman Brothers declared bankruptcy and Merril Lynch sold itself to Bank of America. All of this seems to relate back somehow to the mortgage crisis that has been in the news for the past year.
Different rules must apply to me. When I went for a mortgage I had to produce reams of paper; tax returns, pay stubs, letters from my employer, a note from my rabbi, birth certificates, passports, whatever. Now I hear that people that were unemployed were getting mortgages and at better rates than I got. Huh?
It's hard to know what to do in times like this. The investment advice that I've been following goes something like this; diversify, buy, and hold. Most of my investments are in index funds. I have 50% in stocks and 50% in bonds. One is always doing bad while the other is doing well and, so far, I have been coming out ahead. I'm not going to be rich but I'm not becoming poor either.