There's nothing like a honking stock market rally to prompt us to declare the end of a financial emergency. But whether or not the economy and the financial markets are really out of the woods, it's clear that the way we approach investing has changed forever.
Here are seven ways your money will never be the same.
1. Stocks are no longer king
But the rally is legit because, at 6,500, stocks were priced for a disaster that never occurred and because many sectors of the economy have improved noticeably since the darkest days of the crisis.
Alas, that is no longer a given. Why? Weak hands have replaced the strong hands of loyal, committed stockholders. It's never been easier to trade enormous baskets of stocks indiscriminately at the drop of a news story, a rumor or some official's comment going viral on the Internet.
This shoot-first-ask-questions-later mentality weakens the ties between share prices and any precise evaluation of an actual business's future earnings and dividends. And because most of us despair at losing money more than we rejoice in making it, we will look harder at investments that pay reliable income and, presumably, protect us against inflation, deflation, currency-rate fluctuations, credit crunches and all the other complications that can cause stock prices to plunge.
2. Diversification has changed dramatically
3. Cash is never trash
Having cash on hand allows you to swoop in and pick up bargains that an often irrational stock market creates. Plus, cash can ease the burdens in other parts of your financial life. If your cellar floods or a tree falls on your house or you have high medical co-payments, you may have several thousand dollars' worth of unexpected obligations. A large cash cushion helps you avoid running up big credit card bills or incurring penalties for tapping your retirement accounts early. Plus, you can use your cash to jump on the deep retailing discounts that will probably be common for years.