Let’s Prosper During That Economic Bust Then…

I love MMM’s articles, and I especially like his latest article How To Prosper During An Economic Boom. In this article he covers how to gain wealth during an economic boom, but also during an economic bust.

Apparently the U.S. finds itself at the start of an economic boom. Personally, I don’t think this is the case for The Netherlands. Housing prices are still dropping and the unemployment rate is higher than ever. Therefore, I found the what to do during an economic bust very interesting and I will keep the boom-thing in mind.

I found it rather comforting to read that we’re doing the right things. And, as usual, I learnt so many new things and got even more inspired to achieve financial independence.

What did you think of MMM’s thoughts on booms and busts?

Love,

Mrs EconoWiser

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4 thoughts on “Let’s Prosper During That Economic Bust Then…

  1. Done by Forty

    I think the advice is sound, but I would nitpick over one point: the idea of using your cash reserves during a bust time to buy as many investments as possible. The bust period is the time you saved up those cash reserves for — I wouldn’t use that cash (which is usually someone’s emergency fund) to buy mutual funds that are on sale. Yes, the prices may be down but there’s no telling whether you’re truly at ‘the bottom’. Timing is tricky. Better to stay the course and continue purchasing with a dollar cost average approach, during both the booms and the busts.

    Reply
    1. Aaron

      Considering all of MMM’s other advice I wonder what these cash reserves are exactly. He doesn’t exactly recommend large cash reserve emergency funds (though he says do whatever you feel you can tolerate).

      Assuming you have cash reserves that aren’t your emergency fund I think he is saying that it is time to invest it. But if you follow his other advice you wouldn’t have these cash reserves. So I guess he is saying “If you didn’t follow my advice before and kept a lot of cash that you don’t need, go ahead and listen to my advice now and invest it.” Which, of course, makes no sense. If any advice should have been given I would think it would be to try to work overtime, or get a second job, or any other way to generate more cash, so that you can invest it. After all, it doesn’t make sense to work extra hard to buy stocks that are overpriced, but it does make sense to buy more when there is a fire sale.

      Reply
      1. econowiser Post author

        Yup, once we’ve paid off our interest-only part of the mortgage we’ll throw our extra cash in index funds since interest rates on savings accounts are ridiculous and we can’t put extra money in the savings part of our mortgage due to weird tax rules.

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