When the economy tanks, people change their habits:
- They put off buying big, expensive items such as cars and washing machines. As a result, companies such as Ford
(NYSE:F)and Whirlpool (NYSE:WHR)suffer.
- They cut back on discretionary purchases, perhaps putting off that kitchen remodeling job, or buying fewer triple venti, nonfat, one-pump, sugar-free, hazelnut, light-whip, extra-hot, two-Splenda lattes. Companies like Home Depot
(NYSE:HD), Lowe's (NYSE:LOW), and Starbucks (NASDAQ:SBUX)see revenues fall, and must take extraordinary measures to stay profitable.
- They start buying more things from discounters like Family Dollar
(NYSE:FDO), and more meals from less expensive eateries such as McDonald's (NYSE:MCD).
Unlike those mostly sound decisions, many people also buy more lottery tickets during recessions. Even in a bad economy, the Colorado Lottery recently managed to sell nearly $500 million in tickets -- its second-best sales performance ever. Desperation drives some of those lotto players -- either they've lost a job, or they fear losing one. But any way you look at it, it's folly to spend more than an occasional dollar on lottery tickets. The odds of winning a big payout are lower than 1 in 100 million, in some cases. (Making matters worse, many big lottery winners actually end up regretting their good fortune.)
How about you?
Are you shaking your head at those poor, misguided souls who buy lottery tickets? Stop and think about your own habits. You might be savvy enough to give lotteries a wide berth, but are you snapping up shares of penny stocks? Even people who love penny stocks often end up burned by them; these tiny equities can be easily manipulated by hypesters, and the companies to which they're tied often lack established track records.
Take a few minutes to examine your own habits, and how they may have changed in this slumped economy. Are you taking more chances, buying stock in companies you know little about? Looking for highfliers? Trading more frequently? Doing things you know aren't terribly smart? (I've done so myself -- like the time I chased a too-fat dividend.)
Odds are, you know the dumb things you're doing. Do yourself a favor, and stop looking the other way. Rein in your desperate impulses, and you'll emerge from this recession in better shape.
Further regret-free Foolishness:
Longtime Fool contributor Selena Maranjian owns shares of Home Depot, McDonald's, and Starbucks. The Fool owns shares of Starbucks,a Motley Fool Stock Advisor pick. Home Depot, Lowe's, and Starbucks are Motley Fool Inside Value picks. Try any of our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.