Retirement Planning Advice and Financial Related Education by Barry Unterbrink, Chartered Retirement Planning Counselor

Friday, October 10, 2008

Near the Maximum Point of Pain Yet?

click the link for my retirement seminar details.

Is the stock market near a bottom? What strategy are you using?

The stock market fell apart again Thursday, falling another 7% or so.

First, I will admit that the 30% worse case fall that I alluded to in my August 11th post was too kind. We're now 40% off the highs registered one year ago this week. I again will forecast that the market is closer to a bottom. The signs: there is a sense of panic among investors that is reaching a point of maximum pain. I've had calls from friends outside Fla. have called me asking for advice that their broker is not providing them. They are really worried that their money may not be around. Maybe they are partially correct; but history is not on their side.

Hopefully, you have implemented a few strategies that I've taught you this year:

* diversify across various market sectors using stocks and mutual funds
* add more money (dollar cost average) into stocks from cash or bonds when prices are down
* only owning stocks and bonds in line with your risk tollerance (if not hedge your bets).

Unless you are needing the money to spend in the next 2-3 years, you should have a stake in the only asset class that historically will earn you the highest return, keeping you ahead of inflation and taxes - stocks. It's really painful now to send in that payment or to see part of your paycheck going into the 401-k plan when prices are falling, but that's always turned out to be the best course.

Re-read my past posts on the markets, and you will see that's the case - Jul. 1st, Aug. 11th and Sep. 2nd. I'll reiterate my lesson plan for you here.

1> Don't base your performance on the highest values of your monthly statement - you will be disappointed. You can rarely predict the highest price to sell; the markets are too tricky to allow that. Instead, review things every 3-4 months and set parameters on how you are going to re-allocate your monies. Say, 60% stock mutual funds, 25% bonds, and maybe 15% cash or money market funds. If stocks do well, and are now 70% of your mix, sell some and get back in balance. If stock values decline to 50% of your total, buy 10% more stock. An old, good conservative rule to follow for your allocation; take 100 minus your age, and devote that to stock-based investments. Time will make you wealthy, not your timing or gut reactions. Hope and prayer are admirable in your faith, but aren't good as investment strategies.

2> Seperate your money into various pots, based on risk and objective. Sometimes having just one account makes investing more confusing, and you may make moves that get you into trouble without realizing it. By using 3 accounts, you could allocate some money to a riskier aggressive stock or mutual fund account, and then hold bonds or fixed income in another safer account, and finally have a "safe money" flexible annuity account that you can put away savings for retirement in 10,15 or 20 years with no risk of loss. Move money from a riskier pot to more conservative pots as your "pots" grow in value.

3> Learn how to read a stock or mutual fund chart. "If you can't measure it, you can't manage it", says a saavy investor on the television. How true. Looking in the Sunday newspaper for a quotation is not enough. You need to understand supply, demand and a few other indicators that the big boys use with stock and mutual fund charts.

I am hosting a Retirement Planning Workshop on October 21st here in Fort Lauderdale. If you are nearing retirement, or know someone who is, please send them the link above to register. It's FREE. Thanks.

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