Terrorism

Falling victim to terrorism is stressful enough without having to worry about financial issues. You can prepare by having things in order and not making panic-driven decisions.

Control what you can about a highly unpredictable situation. Disaster preparedness experts suggest getting a cellphone and e-mail address (for more ways to contact family and friends), having at least one radio or television that runs on batteries, keeping batteries charged with extras on hand, and attaching a recent photograph of each family member to updated health information such as the names of their doctors, allergies, regular medications (drug name and dose), and insurance policy contact information. Fingerprints of family members, especially children, are also recommended. Put this information in an “emergency box” that can be grabbed quickly, if needed. For more information, visit www.ready.gov.
On the financial side, prepare a will and review your life insurance to adequately protect dependents. Contact creditors immediately if you will have difficulty paying bills due to a loss of household income resulting from an act of terrorism. Apply for and obtain assistance payments available through an employer or government agency.
Avoid “knee-jerk” investment decisions. Investing is a long-term proposition. History tells us that stocks, while very volatile in the short-term (especially after calamitous events), have provided a higher return than bonds or cash assets (such as Treasury bills and CDs) over time periods of 15 to 20 years or longer. Uncertainty is a fact of life—and stock prices generally reflect negative events such as economic and political instability, war, and terrorism. For example, the Dow Jones Industrial Average stock market index lost nearly 700 points on Sept. 17, 2001, when the stock market reopened after the events of September 11, 2001.
When people sell invested assets out of fear following a catastrophic event, they turn a “paper loss” into a real loss. Investors who try to “time the market” generally don’t succeed because they miss the best trading days that inevitably follow days with large losses.
Instead of panicking, financial experts generally advise “staying the course” with an ongoing dollar-cost averaging strategy. This means that a regular dollar amount (i.e., $100) is invested at a regular time interval (i.e., monthly). When share prices decline, investors purchase more shares with their fixed investment. Over time, dollar-cost averaging lowers the average cost per share and keeps the emotions associated with investing in check.
Another investment lesson learned during September 11, 2001, is that money market mutual fund redemptions cannot be made when financial markets are closed because they contain securities that trade on exchanges. Therefore, consider keeping emergency cash in more than one type of financial institution (a bank or credit union and a money market mutual fund, for example).