How Pessimism And Optimism Influence Investment Options

Whether you feel your country’s future is bright or dim shapes not only your political opinions but also your economic decisions. Financial blog The Simple Dollar posted that if you feel the economy is headed for a downturn you should make minimum payments on current debt and invest in goods and foreign stock while if you feel that we’re due for an upswing you should pay your debts as quickly as possible and invest in domestic stocks.

Photo by David Sim.

If you think the dollar is headed for a period or rapid inflation or deflation you’ll want to delay your payments as long as possible so that you make later payments with dollars that aren’t worth as much as current dollars. You’d probably also want to invest in tangibles that can provide for you now and when times are harder such as land, alternative energy sources, growing your own food, etc.

However if you think the economy will keep improving over the next few years, you’ll want to be able to take advantage of the opportunities offered by a stronger economy by reducing as much debt as possible to keep your personal cash flow high. If there is a rebound stocks will go up, so if you believe better times are coming you may want to try and invest now to capitalise on future growth.

Do you see the economy expanding or shrinking over the next several yeas? How do you plan to take advantage of this?

How Political Perspectives Change Your Money Choices [The Simple Dollar]