Markets Going Boom May Also Go Bust Someday


If you’ve been following the stock market over the past 30 years or so, then you are probably well aware of the fact that bubbles occur and eventually they burst. It happened a little over 15 years ago with the tech bubble, followed less than 5 years after that by the housing bubble. Those bursts were felt throughout the markets and the country. billions of dollars were lost during those bubble bursts, along with jobs in many sectors and homes in many regions. Why am I bringing this up? Well, I’m using it as a reminder that despite how good things may be–and let’s not kid ourselves, the stock market is still trending upwards–there will come a time when the fun ends. After all, what goes up, eventually comes down. So what can you, as a retirement investor do to take advantage of the good fortunes while also protecting yourself (as best as possible) from the bad? Diversify and make sure to review your investments at multiple periods throughout the year or when you hear of market changes. Diversification spreads the risk around and prevents all your money from going into one area of the market. If you diversify, you can limit the damage that a downturn in one market sector can do to your portfolio as a whole. Of course, along with diversifying, you want to track your investments. That means checking your portfolio at regular intervals and checking it when you hear of changes within market sectors that you are invested in. Tech companies struggling? Make sure your tech investments are safe. Homebuilding ramping up? Maybe you should look to make some investments in that area. Those are just a couple of examples. If you need help with your portfolio or just want to talk about your risk appetite, you should of course speak with a certified financial planner, wealth manager, or investment professional.

Investing is Based on Luck; Diversification Helps

I’ve touted the importance of diversification here in many posts over the past few years. While it may seem like diversification is the cure-all for any portfolio, I should remind you that regardless of whether you diversify or not, investing is still a risky endeavor that way more often than not involves a lot of luck. That’s not to say you still can research a stock or company you invest in and do your homework–that helps immensely to determine strong performing stocks and to avoid ones that tend to be more volatile. However, no matter how the stock has performed over the past 10 years, or whatever timeline your research covers, that still doesn’t mean it can’t go sideways. What diversification does is to help you to lessen the damage that can happen to your portfolio if a stock does go sideways. Diversification allows you portfolio to absorb the loss because that loss is, ideally, not a large overall portion of the investments in the portfolio. Furthermore, if you invested in other stocks on the rise, your loss could potentially be covered by the growth of other investments. Again, I want to reiterate, though, that diversification will not automatically lead to portfolio growth or success in investing. It will just make the inevitable losses (yes, every portfolio loses money at some point if you invest long enough) palatable and less damaging. No matter what you do investing, at it’s core, is a game of luck. So, are you feeling lucky?

Giving Your Portfolio International Flair

Diversification is important to your portfolio. It spreads your risk around and prevents a market downturn from completely decimating your portfolio by ensuring that all your money isn’t tied up in one sector or one type of stock. Remember, some areas of the markets will get hit harder than others. I’ve mentioned various ways to diversify–such as investing in unrelated market sectors, investing in companies of various sizes, having different investment vehicles. What I haven’t really talked about is going international as part of your diversification. Having some investments in international companies–or companies based outside the U.S. and Canada–can be a smart move as it can allow you to take advantage of other markets that may be on the rise. There are lots of companies around the world that are well-known and just as financially strong, or growing exponentially, like American companies. There may also be some markets not found in the U.S. that can offer strong returns or which are growing quickly. Keep in mind that the U.S. won’t be able to dominate the markets forever and eventually foreign markets will emerge that can provide solid growth and returns. Now, I am not encouraging you to invest in any/all international markets or just any company not based in the U.S. You will still want to do research and make sure you are making a smart investment. And you will probably want to keep your international investments on the smaller side compared to your investment in U.S.-based markets and companies. If you are thinking about investing in international companies or markets, you should speak with a certified financial advisor, wealth manager, or investment professional to make sure it’s the right choice for you and your money.

Diversification For the New Year!

It’s been a while since I last harped on the importance of diversification and making sure that you are spreading the risk around in your investment portfolio. Now that we are into the new year–and a new decade–now might be a good time to talk about it again. Diversification means investing in various stocks and market sectors so that you are not just putting all your risk on one place. By spreading the risk around, your portfolio won’t be as hard hit by market swings. For example, if you have some of your portfolio invested in the tech sector, for example, then if that market sector takes a hit, it won’t decimate the rest of your investments. Over the long-term, diversification can really help your nest egg to grow by limiting harm. Now, keep in mind, diversification is not a set it and forget it type of thing. You need to check you investments from time to time and make moves when necessary. You may find that certain sectors or investments just aren’t worth it any more or that there are new companies that you want to invest in. If you need further help with diversification or have questions about how it works, you should speak with an investment professional, such as a wealth manager or financial advisor.

Want Peace In Retirement? Ignore the Markets!

I’ve said it here before and you’ve probably heard it thousands of times from other sources, the stock market is unpredictable. No, you can’t beat it or think you can outsmart it. So, what’s the best way to deal with it if you are using it to help build up your nest egg or fund your retirement? Ignore it! I know that might be hard to do, but it’s the only way you’ll stay sane. That’s especially true during economic periods like what we are going through right now. At the moment, it’s hard to tell what exactly the markets will do from day to day, let along week to week or month to month. Over the past twelve months the markets–particularly the stock market–have been up and down and many pundits are screaming that we are on the edge of a recession, but yet we never seem to go over the edge. This can be a frightening time for average Americans with retirement funds tied up in those markets. However, if you’ve been smart with your investing and have done things such as diversifying your portfolio, forming a strategy that meets your risk appetite, and focusing on long-term returns, you will most likely be okay. Furthermore, such investment strategies and outlooks tend to allow you to ignore the markets because they produce more consistent and steady returns over the longer term. Let’s face it, this is the approach most Americans should be taking. Now, that’s also not to say that you shouldn’t take a peak at the markets from time-to-time or ignore news about the overall performance of investments and markets. You also shouldn’t ignore your portfolio and should check it occasionally to make sure it still matches your appetite for risk and rebalance if need be. And of course, if you need help with your investments or investing strategies, you should speak with a certified financial planner or investment professional.

Outsmart the Markets? You’ll Just Look Dumb

Many Americans use the stock market–and other investment markets–as a way to build up their nest eggs over the long-term. After all, well thought-out investments in steady, low-risk annuities or mutual funds can produce quite a return over a long period of time, such as multiple decades. However, not all Americans have the discipline and patience to make such long-term investments. It’s not uncommon for some to attempt to outsmart the markets by either trying to predict what an investment will do next or by making risky investments that they hope will payoff in the short-term. This rarely, if ever, works. Rather, it usually ends with a loss of some sorts, which hopefully isn’t enough to derail their nest egg or retirement savings. While it can be tempting to try to approach the stock market like they do in the movies (you know, where they yell “Buy! Buy! Buy!” and “Sell! Sell! Sell!” and then walk away with a ton of money after incredibly risky investment), you really should approach it with caution and a long-term vision. That means focusing on investments that won’t make a splash right away, but rather will provide you with the boost you need to build up your retirement savings for when you will really need it–when you’re retired. Furthermore, don’t even bother attempting to outsmart the market. Just focus on your returns and making investments that are right for you. Now, this does not mean that you can’t change your investments and portfolio from time to time or that you shouldn’t track your investments. Of course, you should unload investments that have become risky over time or are trending heavily downward. However, if your investments are well researched, diversified, and are low-risk, you shouldn’t really have to worry about doing a lot of transactions or changes to your portfolio. As always, if you have questions about your portfolio or want to find better investments strategies, you should speak with a certified financial planner.

A Bullish Stock Market Doesn’t Equal Retirement Riches

It’s been over a decade since the stock market hit the lowest point of the recession in 2009. Since then, it’s done nothing but seemingly improve. After a decade of seemingly (key word here) bullish activity, one would think that a lot of investment portfolios and retirement accounts would be reaping the benefits, but that’s not necessarily true. In fact, the majority of Americans will still struggle to save enough for retirement. The biggest reason? The majority of stocks are still owned by the richest few Americans. While many Americans were able to bolster their nest eggs by investing during that period, very few middle class Americans were able to see their investments skyrocket at the same rate as the stock market. It’s important to keep this in mind if you plan on relying on the stock market to help fund your retirement. Just because the market is doing well doesn’t mean your portfolio is performing the same. There are various reasons that could be, such as the stocks you invested in, how much you’ve invested, and current events that are outside of your control. Most likely, though, is because your portfolio just isn’t big enough to feel monumental effects from market movements. It’s also a good reminder that you may want to consider having more than one source of retirement income or savings. No, you do not want to invest all of your nest egg in the stock market. There are other ways to earn money to fund retirement, such as investing in a rental property or working a part-time job. Now, back to what I was originally talking about in this post, the fact that a bullish market doesn’t mean that your portfolio will follow the same path. It can be a sobering thought for many investors, but it’s reality. If you are considering investing, as always, talk with a certified financial planner or investment professional. They can help you diversify your portfolio and position it to best take advantage of the market while minimizing risk (or vice versa, if you prefer).

Keep Your Investment Strategy Simple!

Investing can get complex quickly. It can be easy to overthink your investments and strategies, which can lead to confusion and just plain bad decision-making. While the pundits and talking heads may throw out random predictions and complex investing terms, but that doesn’t mean you need to get overly complicated with your portfolio. In fact, it’s best to keep your investing simple. That means taking on less risk, increasing your savings rates, and giving focusing on investments that are better geared to weather market ups and downs. What you want to avoid are complex strategies that may require you to keep a close eye on the markets or which may involve putting your money in risky investments and volatile markets. Luckily, keeping your portfolio simple isn’t hard to do. You can easily diversify by investing in things such as blue-chip stocks and mutual funds. You will also want to invest in various companies in various market sectors to better spread our risk around while also bringing in dividends over time. You can also look at longer-term investments as they tend to be more stable and may produce returns that over time (think decades) can really add up. As for strategies, try to find a plan that doesn’t involve touching your portfolio all that often. Yes, you will want to track your investments, but strategies that involve constantly buying or selling or changing your position can open you up to risk and can be costly in regards to fees. As always, if you need help with your investment strategies or picking investments to help keep your portfolio somewhat simple, you should speak with a certified financial planner or investment professional.

Preparing for the Risky Retirement Period

If you are more than 10 years away from retirement, then you probably aren’t thinking about the few years immediately before and after you retire. If anything, you’re probably most focused on whether you have enough saved at this point and when you might actually want to retire. As you move closer to retirement, you should pay attention to the five years before and the five years after you retire as that is the period of time that sets the tone for your retirement. It’s also a period of time during which your nest egg is most vulnerable. This is especially true if you are relying on the stock market and investments to ease the burden on your nest egg. If the market makes a correction or a downturn during that period, you may find that the money saved up really isn’t as much as you thought. Furthermore, lower returns could force you to tap into the principal of your nest egg when you intended for the returns to cover certain expenses or provide breathing room. This could shorten how long your nest egg lasts. Of course, you could also experience a market upturn, which may put more money into your retirement savings that you anticipated as well. Regardless, how do you avoid suffering a hit to your retirement money? Diversify! You’ve heard me say it before, but spreading the risk around can be huge and can help you prevent your investments from taking massive hits. By spreading the risk around, you mitigate it. Also, you want to be smart about your investments. Do some research and make sure that the companies and market sectors you are investing in are stable and consistent. That means avoiding the stocks predicted to skyrocket (what goes up usually comes down…hard) or avoid companies that may be open to federal investigations or have questionable practices. The key is that you weather that decade surrounding your retirement date and head into retirement with enough money in the bank and with your investments providing the returns you need them to. If you need help with choosing investments, talk with a certified financial planner or investment professional.