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October 22, 2008

Be Flexible and Diversify

Be Flexible and Diversify

David Cassel

Techdirt

Summary

In the last six weeks, I've lost 25% of the money in my retirement funds. But I remember my financial planner's advice: The worst time to ch

In the last six weeks, I've lost 25% of the money in my retirement funds. But I remember my financial planner's advice: The worst time to check your portfolio is after a major market drop. Worry about current problems, not future ones, especially since the economy has been lurching wildly week after week. And remember that right now workers are facing the same crushing uncertainty as business owners. So it's not just one industry's problem - it's everybody's.

I worked for a magazine about PDAs in 2001. One day, I read that Palm had laid off nearly 20% of its workforce - and eight weeks later, I was laid off. I should have realized that Palm was one of our biggest advertisers, and the ripples would be very real. So I'm rightly worried about the same thing today. I own a small but very profitable website that's entirely supported by ads. If the financial crisis sinks my advertisers, I'll be hit by the first ripple.

Obviously, it's a good time to trim expenses and try to raise enough cash to withstand the crisis. But there's another old-fashioned response: be flexible and diversify.

I was laid off in 2007, but since then I've managed to pay all my bills with a patchwork of fascinating new enterprises and online projects. When one revenue stream suddenly dried up in September, I was able to simply increase my time in the other areas. On the side, I've even found a website that's now paying me to write short stories for children. While it's not much money, it's a dream I've had my whole life.

Maybe an economic crisis is as good a time as any to try moving in a new direction. In 2008, I even discovered a man who'd been laid off from his job in the mortgage industry who then immediately started a successful home-based transcribing business with his wife. During a rough patch, I became one of his online workers, earning over $3,500 in just a few months. It's also proof that in difficult times, it always pays to network.

The financial crisis has already darkened our spirits. It may change the outcome of this election. It may hamstring our government policies for years. Ed McMahon has lost his house. And three friends of mine have started hoarding gold. I returned from a two-day vacation to find one had left this message on my answering machine.

"Um...look. Here's the deal. I know you still have your mutual funds. If you want to make it, you have got to sell them today. This market is coming down hard next week, dude. It's crashing, and it's not going to come back for a long ******* time. Holy ****, get out today, please for the love of god, get out. Okay, bye."

The next week the price of gold went up, and my friend invited me out to gloat. And that weekend, I discovered spammers were now incorporating the bailout into their come-ons. (A suspicious email advised me that "Federal Bailout grant funds are now available to you. [Click here!]"

But I'm just not convinced that it's a crisis we can't weather. My bank was one of the ones that failed: Washington Mutual. But overnight, it was acquired by JPMorgan Chase, and the transition has been surprisingly seamless. They were quick to assure me online that nothing changed - that deposits remain insured by the FDIC and that JP Morgan Chase "has more than $2 trillion in assets and is America's #1 bank in deposits." (And soon, I'll have access to 9,300 more ATMs.) And the bailout package even increased the size of the FDIC's guarantees temporarily to $250,000.

In fact, Business Week says this is actually a great time to invest in the stock market - since the price of every stock has dropped dramatically. NPR reported that one stockbroker (who actually works on Main Street) has reported that business is booming. (And I trust Business Week - probably because I remember my father had a subscription when I was 13.) Maybe every crisis really is an opportunity after all.

Arthur C. Clarke once said the best advice for humanity came from a Douglas Adams book: "Don't panic." We'll survive this crisis with faith, in our country and in ourselves.