“…I’m gonna party like it’s 1999.”
Music rock star Prince’s lyrics
The stock market is again the talk of the town, evinced by
the top billing news story on your network and cable news channels this week, along
with the constant scrolling factoids across the financial channels CNBC and
Bloomberg TV. It’s hip-hip-hooray that the stock market is approaching the
all-time high set back in 2007; just above 14,000 on the Dow.
Noticeably absent from the news and discussions,
is that the NASDAQ stock market average is still 2000 points below its high set
in March, 2000 - thirteen long years; it remains 40% below the 5,000 level posted at the painful end
of the “dot-com” craze. So, if you had $100,000 on your statement then,
you now have about $60,000; that’s not nice. Negative news is often ignored by the media
when a better story exists. Is this time ‘different” than the recent tops in prices
in 2000, 2007? Those two near 50% declines were soul-searching. We have
no crystal ball predictor on premises, but do advocate risk reduction strategies for our clients' money. So how can we learn something useful
here?
First off, be skeptical. I didn’t say negative or
pessimistic. Just weigh the facts with your money against that. Admit that you
are not perfect; not in your life, finances, relationships, etc. Nobody sells
all out at the top, and then buys in at the bottom. Many had big money and big gains in 2000
because they took large positions and risks in stocks during a spiral, out of
control, greed-fed market.
Second, realize that you don’t invest solely in a stock
market index like the S&P 500 stocks, or the Dow Jones Industrial stocks,
or NASDAQ stock index and hold the same investments year after year, so your "results may vary". You could,
but it’s not feasible and you may have limited options in your 401k or
retirement plans, or maybe you think it is boring. Many times you won’t know
what you actually own if you’re invested in stock mutual funds (hint: stock
mutual funds normally hold some bonds and cash too).
Once you ‘stray away”
from the popular stock market index investing strategy with any of your money,
you’re kind of back in the “wild west”, subject to different dangers – and
opportunities – depending on your “bets” in this or that stock, bond or mutual fund.
There often isn’t enough time to do the homework involved in this – that’s why
money managers and mutual funds exist.
Third, it is critical to know what and how much you own - on a broad basis.
Have the basic allocation of stocks/bonds/cash that comprise your investments
in your head and written down. Almost 90% of your investment returns are due to the allocation of your money; not the individual securities. Don't assume that things will take care of themselves.
You probably have the information at hand now from the December
and year-end statements filling your mailbox the past couple weeks. It’s a good
time to review them, putting the numbers down on paper or in a spreadsheet. Ask
if I can help you set this up for you or review your statements/performance. No doubt, improvements can be recommended.
I’ll soon be unveiling some new management programs that we’ve developed over
the past year or so that should benefit you. They are low-cost, using a
combination of index funds, bonds and alternative assets, metals, foodstuffs,
etc., that have proven to reduce volatility, provide some income, and grow your
money.
Be well and safe,
~Barry
https://twitter.com/allthingsmoney
www.linkedin.com/in/retirementplanner/
