I’m a little bummed that the bottom fell out of the real estate market right after we “bought” our first house (we don’t own a house, we have a mortgage). More to the point, it’s no fun watching the value of any asset decline.
But the title phrase of this post, “Volatility is not Loss,” should give us some comfort. It’s something that any financial planner will try to express, and I heard it uttered by a broker on the radio yesterday afternoon. It’s a good sentiment to remember in times like these. A paper profit or a paper loss is just that, you don’t make or lose money until you actually sell an asset.
Every asset is different, but for those linked to the larger economy, like a house in a major metropolitan area or a mutual fund with broad holdings, things may not be as bad as they seem. The current financial crisis might lead to a permanent revaluation of many assets, but it’s also possible that this is just another business cycle. What goes down will go up again.
On the other hand, that is little solace for those around us who are losing jobs, struggling to pay bills, and wondering what the future holds. As the seasons of Thanksgiving and Advent approach, I hope that I/we will be grateful for what we have and redouble our efforts to help anyone we can.
Shalom.
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