Crisis To Confidence

Crisis To Confidence, Today, we’re hearing about – and experiencing – historic

Rosa Shala MDRT Your Certified Insurance Expert

volatility in our financial markets. Market volatility of this magnitude is upsetting, but you don’t have to let emotions guide your financial decisions. I’m reaching out to you because I know you’re concerned, and I’d like to offer information and ideas.

New research suggests the way you react to a financial crisis may determine your long-term success as an investor. How did successful investors respond to past crises? The answer may surprise you. While successful investors remained steadfast, the most successful investors invested more during financial crises. (Source: Ned Davis Research and Wiesenberger, 10/08).

A Crisis That Began With Good Intentions

The current financial crisis was born when the U.S. government pressured

mortgage giant Fannie Mae to ease credit so more people could afford mortgages. In addition to lowering the requirements for down payments, Fannie Mae increasingly issued subprime loans to borrowers who could least afford them. Many other lenders followed suit, especially as the economy strengthened and home prices skyrocketed. Meanwhile, these subprime mortgages were being packaged into complex financial instruments that were bought and sold as securities. When housing prices across the nation plummeted, these securities began to lose value, and soon
there was no market for them. With literally hundreds of billions of dollars tied up in these illiquid securities and access to credit tightening rapidly, the financial system nearly ground to a screeching halt, resulting in government intervention to prevent a worldwide credit crisis.

September 2008 will be remembered as a monumental month in our nation’s financial history. Turmoil in the financial markets brought down some of the biggest and most prestigious firms on Wall Street, and led to a government rescue plan of staggering proportions. While the current financial crisis is larger and more complicated than its predecessors, the prospects for recovery remain every bit as likely. “New regulation will emerge to prevent this type of disaster from occurring again, confidence will gradually return to our financial markets, and the result will be a stronger financial system that extends beyond our nation’s borders,” says The Hartford’s Chief Investment Strategist, Dr. Quincy Krosby.

By reviewing past financial crises and the recoveries that followed, you can remain calm in the midst of uncertainty, avoid making hasty decisions that could seriously set back your long-term financial goals, and move from crisis to confidence. The way you react to a financial crisis may determine your long-term success or failure as an investor. As with any crisis, anxiety usually leads to poor decisions, because you temporarily lose sight of why you invested in the first place. Have your financial goals really changed, or are you reacting out of fear? You don’t need to find all the answers on your own. For more information contact

Rosa Shala 352-207-7920 rosashala@shalafinancial.com