FOOL ON THE HILL
Your Investments: Now What?

In the wake of our country's most fatal domestic attack, with our sense of security rattled, what should you do about your investments? Well, this fact, for one, hasn't changed: Your investments should reflect your long-term beliefs and your tolerance for uncertainty. Now is an important time for investors to make sure their investments don't keep them up at night.

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By Jeff Fischer (TMF Jeff)
September 14, 2001

If testing of U.S. stock trading systems pass muster this weekend, the country's stock markets will reopen on Monday at 9:30 a.m. Eastern time. Volatility will likely be extreme.

In the wake of Tuesday's criminal disaster, Asian stock markets tumbled as much as 12% before rebounding a fraction in subsequent days. Major European markets lost an average 5.7% on Tuesday, but rebounded 4% over the next two days.

Whatever happens when the U.S. stock markets reopen, the topic of finances seems trite today, as we all think about what's most important. Though apathetic feelings toward money are understandable now -- and could remain with us for some time -- our instinct to survive will soon return just as strong as ever, and a key part of survival is financial security.

Already many people are discussing the possibility for a drastic decline in the U.S. stock market indices. Fears abound that this week's tragedy will push the economy into a recession as consumers recoil  from spending and take a defensive stance.

Additionally, air travel will never be the same, and air travel is an enormous linchpin in our economy -- both for business and recreation. But air travel will resume. It will rebound and be much safer than before. And Americans will rebound, and we'll likely be more thankful, more considerate, and more thoughtful about how we live than we were before.

Our country isn't invulnerable -- it isn't cut off from the horrors that much of the world periodically suffers -- but our country will now work harder than ever to make itself and the world a safer place; a place of freedom, opportunity, and justice. We will work for this.

We all know in our hearts that this is true of our spirit.

Knowing this, we should realize that selling our investments in the wake of one maniacal event perpetrated upon us by fanatically soulless individuals would be counter to our long-term belief in ourselves and our country -- and counter to a belief in the world.

If you own individual stocks and the long-term situation for some of your companies has changed radically, of course you should reassess your investment, just as you should whenever something changes for one of your companies. But do take time in assessing the situation. Don't knee-jerk.

If you own index or mutual funds, and you plan to hold them for at least three to five years -- as should always be the case -- a terrorist act should not alter your resolve. Yes, we may be entering a recession. But that was true before this attack. Reality is, we don't know what will happen next. We can't ever know.

When you invest, therefore, you must use time as your prime defense and asset. It is only over substantial amounts of time that the stock market, on average, rises. Time spent holding strong underlying assets is, in the end, what makes you an investor. In the near-term, be prepared for anything.

This means avoid using too much margin. (Any more than 10% and your risks start to rise substantially.) This means never buy an equity that you plan to own for anything less than three years. This doesn't mean buying and blindly holding. It means buy to hold. Consider selling if something changes negatively for an investment's long-term outlook, or if you've found something that you believe is truly better for the long-term.

This week, certain insurance companies, airliners, and several financial businesses have suffered at least intermediate-term setbacks, and some of these organizations -- I'm not talking about people or the horrible loss of life right now -- may have suffered lasting long-term damage. Some businesses may be in jeopardy. But learn all that you can before you take action; don't simply react with a sale without reasoned research first.

This has been the longest market closure in 80 years. This has been the most deadly attack on American soil in modern history. But we're not at war with another country (although we promise war on terrorism), and our economic -- business, financial, and transportation -- structure remains in place. Our hearts and minds are wounded, but despite the horrible losses, we will come back stronger, we will continue forward, and we will do so in part to honor the thousands who have lost their lives to terrorism.

As for your stocks, as always, you should follow your beliefs when you invest. If you believe that in the next five years or longer the companies or funds that you own will grow stronger, and share prices will reflect that, you needn't think more about it today, nor when the markets reopen.

If you believe otherwise, reassess and reconsider. In the end, only you know what makes you sleep better at night when it comes to your money. In a world of continual change, we all have different levels of tolerance for the uncertainty surrounding us. Your investments should reflect your long-term beliefs. Your investments should reflect your tolerance for uncertainty.

This hasn't changed. The Motley Fool's investing message hasn't changed.

Jeff Fischer does not plan to take any near-term action regarding his investments in the wake of this criminal tragedy. The Motley Fool has a progressive disclosure policy.