What do you think about long term financial planning vs possibility of global economic crisis?

POSTED BY Ramesh ON May 17, 2012 4:51 pm COMMENTS (6)

This question is about the various doomsday scenario hovering around.
How would you advise going around the notion that there is a possibility of total financial system overhaul leading to extreme value dropping of your saved money? Especially in the sight of “policy paralysis” / “no-more-reforms” in India? A possible Eurozone collapse? Unpredictable future of the US economy. Is it reasonable to project long term plans in economy (local or global) which doesn’t know what will happen a year in the future? Isn’t it more rational to steadily convert ongoing money flow into more value-stable physical goods (like gold) instead of trying to save it for retirement?

Does it make sense to save resources for the future if there is significant risk for those resources’ value in the future? What do you think?

6 replies on this article “What do you think about long term financial planning vs possibility of global economic crisis?”

  1. somasekhar says:

    Hi justgrowmy money,

    sorry for the delayed reply as I didn’t see your comments in my Inbox.

    Coming to the point, till now India & China are the emerging economies in the world, but it will be the history for China because of China’s one child policy. Now every new couple in China trying for male babys ( sources ). After 2 decades, everyone will be male, if China continue this.


  2. While I will bet my money on India growth story I wont write off China so soon. China is moving ahead at enormous speed – we have been left behind long ago. But the law of averages will catch up and China will slow down, not soon but in another 4-5 decades when a bulk of their population ages. At that time India will still have a healthy number of younger individuals contributing to the growth of the nation – a ripe time for us to barge ahead.

    India and China have been the world’s largest economies for millions of years until the year1800 when Europe and then eventually USA took over. We will just come back to the old world order with India and China being the top 2 largest economies in 2 decades time.

  3. somasekhar says:

    Hi Ramesh,

    Nice question from you. Everyone has same question now. In some times, policy paralysis will help people. Good examples are Food security bill, Lokpal and NCTC. Now govt is unable to pass these worrest bills in parliament.

    In India only, People can run forums or blogs like Jagoinvestor because of our freedom & democracy. Our system is our strength. So policy paralysis is common in some times.

    just observe China position. Right now that is the largest economy and everyone praise their policies. There is no policy paralysis in China now. But that itself ruining their country. everyone is saying China will overtake US within 15 years, but it will be in the last place at that time. That will be the worrest economy after 20 years because of their current policies. But India’s story is different.

    After 20 years, we will rule out the world include China also. Just continue SIP’s in mutual funds blindly.


  4. Dear Ramesh, among all these doomsday/market crash theories, there is one simple thing, Mr. Market is the smartest guy. The tide ‘ll turn, when? My guess is as good as yours’.

    Remember after the great crash of 2008, there was an even greater performance in 2009. If there was dot com burst in 2000, there was a recovery.

    A bare minimum growth level ‘ll remain in India & this ‘ll keep on going, no matter policy paralysis continues or not.



  5. Nitin Verma says:

    If U can wait.. for 10-15 years.. I say its all the more good if market crashes at least 2 times in between,,,,,averaging out gives good returns.. Be a disciplined investor.

  6. It is a disturbing fact but a true one that few months of weaknesses in the market will let us question the rationality of the market.

    Someone said that “The funniest thing about humans is that every generation thinks they are smarter than the previous generations and that no other generation in future will be smarter than them ever”. To twist this much more severe crisis have been encountered by our previous generations – WWI in 1914, Great Depression in 1929, WWII in 1939, Cuban Missile crisis that took the world to the brink of a nuclear war in 1962, Oil shock and recession of the 1970s – when in 1973 , unemployment in the US in early 1980s, Japanese bubble burst of 1989, Gulf War that luckily did not turn into a world war in 1991, Asian Currency crisis in 1997, Dot com burst in2000, Great recessional/Financial crisis of 2008 and the aftermath of it – the Euro shock of 2011 which is unfolding fully. In all these 100 years Equity has been the outstanding performer. And in year 2112 justgrowsomeone’smoney will write a longer paragraph here with all the events from 2012-2112. Markets factor in the pain factors many a time.

    Again, Indian Policy paralysis is nothing new. It has always existed but India had grown. The demographics of India will fuel wild consumption and grow the economy big time. I would not consider the market reactions as predictions of a dooms day ahead. If one’s goals are more than a decade away they should all take control of this situation and pump more money in Mutual Fund SIPs now. No one knows the bottom. The market may swing anytime – which way is anyone’s guess. But cost averaging is a time tested proven fact across countries and generations. Jump into the India economic growth wagon. There are decades of growth left.

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