1. Money
Joshua Kennon

Keep Your Financial Head On Straight ... and Realize We Will Get Through the Fiscal Cliff

By November 29, 2012

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Investors are once again panicking over a short-term event; the so-called fiscal cliff.  They are selling their stocks to pour it into cash, not because stocks are expensive - they're fairly valued on a historical basis - but because these people think stocks might go down.  It's a stupid way to behave.  It is very possible to make money from stock market crashes if you have a long enough time horizon.  Stocks might crash.  Or they might not.  It doesn't matter.

What matters?  Research from people like Dr. Siegel at the Wharton School of Business makes the path to success clear.  When you find a company you want to own for a very long time, it trades at an attractive valuation relative to Treasury bond yields (adjusted for growth and risk), you have the spare cash to fund the investment without taking on margin debt, and you can hold it in a tax-efficient way, your net worth is very likely to grow with the passing of time.  This is a function of basic mathematics.

Financially speaking, life can end up very good if you pick up a quality collection of such companies along your journey.  After a lifetime of building up assets this way, not only can you live off the passive income yourself, but you can later transfer everything to trust funds to give to your children and grandchildren as an inheritance.  It just takes patience, discipline, and an ability to control costs.

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