Markets Going Boom May Also Go Bust Someday

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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.

It All Starts With a Nest

You can’t plan for retirement without first thinking about the money you will be spending in retirement. Thus, your retirement planning–and everything that follows those initial plans–will focus on your nest egg. How you build that nest egg will have a monumental impact on what you can do when you actually most into your post-career life. If you take aggressive steps and keep on top of your nest egg, then you will probably have a good chunk of money ready for when you stop working. On the flip side, if you don’t take steps to properly build up a nest egg or make bad decisions when doing so, then you probably won’t have much flexibility in retirement or may have to work longer than intended to meet your goals. No matter how you slice it, your nest egg is essential to your retirement plans. Now, if your nest egg isn’t quite where you want to it be right now, don’t fret. You can always take steps to get back on track and then determine what’s realistic from there. There is no on-size-fits-all answer for that, but some steps would include re-evaluating your retirement goals, analyzing your portfolio and/or investment decisions, or working with a financial planner or wealth manager to really kick your saving into gear. Each person’s situation is unique regarding how much they need to save for retirement, so some may have a lot of work to do while others may be right on track. What’s key, no matter where you are in your saving journey, is that you never lose track of your nest egg and that you focus on building it up as much as possible. So, how big is your nest egg?

Don’t Let the Election Impact Your Portfolio

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I believe I wrote about this a number of months ago as the election season was starting to ramp up, but I feel the need to mention it again: Don’t let politics drive your portfolio decisions. In the weeks leading up to the election, it can be easy to get caught up in the theories and predictions about what might happen if a particular candidate wins or a certain party gains power. Some will take those predictions and make portfolio decisions in the hopes of getting ahead of the curve regarding how the markets might react to certain administrations. First off, it is incredibly difficult to predict how the markets will react to elections. What economic pundits predicted at the start of the past two administrations did not come to pass with the markets performing much stronger than expected. Rather, you should make your portfolio as you normally would and ignore the election when doing so. Don’t give you portfolio any special treatment between now and Nov. 3. That can be hard to do, especially with the news cycle (and social media and conversations with friends) being filled with election talk, it won’t be easy. However, trust me, it will be worth it to keep your portfolio on the same road it’s be going on.

Getting Your Kids in the Investing Game

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You’ve probably heard me say on this blog that the best way to save for retirement is to start early. The same goes for investing. One of the best ways to teach your kids about the stock market and get them thinking about their financial future is by allowing them to invest in the markets. Many of the major investment platforms offer custodial accounts, which allow parents to set up trading accounts for children under 18 and which require adult permission to complete transactions. Once you have the account, you can decide how to best teach your teenager the importance of risk and investing. If you have more than one teenager involved, maybe make a game out of it and see whose investments perform the best over a set amount of time. If your teenager is more goal oriented, maybe encourage them to use the account as a way to grow money for something like a car or product they want. Whatever you choose to do, be sure to guide them and set some limits. You may want to limit what investments they can put money into (no options, etc.). You will also want to encourage them to use properly vetted resources, such as popular investment books or well-sourced blogs. Heck, you yourself may want to use it as an opportunity to read back up on the latest investing trends and advice out there, if you haven’t already. Of course, you will also want to teach your children about risk as they will most likely experience some loss. It may be hard for them at first, but if you encourage them to be patient and learn from why the investment went down, then it will be a good thing in the long run. Just make sure they don’t lose too much, or for that matter, gain too much without learning about trends and why their investment performed the way it did. With the right guidance and some sound advice, your children can learn about the stock market and hopefully set themselves up for a solid financial future. What did you wish your parents taught you about investing growing up?

Change Is a Good Thing

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“Change is the only constant.” You’ve probably heard this expression before. I believe it is sometimes attributed to the Greek philosopher Heraclitus, but it gets used often as a business mantra or by people who are seemingly always in motion. It’s also a reminder that despite our best efforts at times, change happens. I’ll admit, change can be scary, but it can also be a wonderful thing. It can force us to reflect on where we are and where we want to go. It can also provide us with an opportunity to try new things and make decisions that we have been putting off. For example, changes in the markets can force you to re-evaluate your investments and portfolio (did you really think I wasn’t going to tie this back to investing or retirement planning some way? lol.). That can be a really good thing. Markets are prone to change as companies come and go and stocks trend up and down. As such, you will need to buy and sell investments from time to time, especially if you are investing for the long-term. Same goes for your retirement planning. Over time, your benchmarks and goals will change and you will need to act accordingly. Yes, it can be a bit scary to think about having to pivot your retirement saving plan, but it can also be exciting. It can be refreshing to have a new interest or goal that fits with what you want more than what you currently have. It really all depends on how you look at it. Change can be a wonderful thing, are you ready for it when it eventually comes?

Ignore the Markets; Stay Invested

One of the worst things you can do when the market takes a dip (or a dive) is to immediately pull your money out. While it may seem logical–why lose any more money–it’s almost always the wrong move. Taking money out during a downturn makes it incredibly difficult to take advantage of the eventual upturn. If you understand the tax implications of losses, you further take advantage through smart tax harvesting (I’m not going to get into that here). Now, I’m not talking about divesting your money in one stock and investing it in another that you think is poised to rebound. I’m talking more about divesting to preserve your cash and then investing when you think things look better. Trust me, by the time things “look better,” you’ll probably miss out on a good chance to make money (the best place to invest in a stock is at the bottom…nowhere to go but up!). The best thing to do when markets take a dip is not to react immediately. Give it a little time and see what happens. If things don’t appear to get better over time (days, weeks), then you may want to consider diversifying your investments or making changes to your portfolio. If there are parts of your portfolio where things are struggling and another where things are strong, you may want to consider focusing on the stronger areas. If you need help with your investments or portfolio, as always, I suggest you take with a certified financial planner or wealth manager or another 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?

Have Your Checked Your Portfolio’s Asset Allocation Recently?

It’s been a rough month for the stock market and for many peoples’ portfolios. There’s been a lot of money lost and a lot of stress added to the lives to many Americans, regardless of whether they are still working or retired. After all, the markets don’t really care where you are in life or what your plans are. With that in mind, now is a good time to assess your portfolio and take some time to determine where your appetite for risk lies. During your assessment, take some time to find out what changes you will need to make to your portfolio based on the risk and where your greatest losses have been. Are there certain stocks that have decreased further than others? Are there parts of your portfolio that have managed to perform consistently well despite the recent volatility? Has your appetite for risk changed at all over the past month or so? These are just some of the questions you should consider when looking at your portfolio. You will then want to clean out underperforming stocks or holdings and look for strong performing investments that meet the level of risk you are aiming for. As always, I strongly encourage you to talk with an investment professional or wealth manager when assessing your portfolio or thinking about making investment moves. They should be able to provide helpful advice and suggestions that can help position you to better reach your goals or benchmarks.

Handling the Bear

Whether you or certain pundits want to acknowledge it or not, we are in a bear market at a moment. What does that mean? It means the markets have fallen–for an official bear market the prices need to fall at least 20%–and investor sentiment reflects that downturn. You’re probably familiar with the term and understand it to be the opposite of a bull market, which is what we were in up until early March. In short, a bull market means things are on an upswing. A bear market is tough to stomach, particularly when it’s not clear when exactly things have or will bottom out, much like the situation right now. At the moment, it seems as though the markets are charting a new course almost hourly during the week. Much of this inconsistency has to do with the ever changing reports coming out of the government and the medical community regarding what is happening/going to happen with Coronavirus as well as the physical shuttering of a large portion of the economy. Being in a bear market can be scary and it’s something that should be taken seriously. However, it can also open up some opportunities to buy into the market at a low and watch your portfolio grow when the market eventually rises. Keep in mind that taking advantage of a bear market requires a long-term approach as it can be hard to tell when the markets will recover. Furthermore, the recovery itself may take some time–quite possibly years–and may not be obvious. You may need to reassess your portfolio in the process, but if you do so with a long-term approach, you may just set yourself up for some success when things recover. As always, I’d strongly encourage you to talk with a certified financial planner or wealth manager if you have questions regarding your portfolio or just discuss ways to financially make it through these difficult times.

The Future is Uncertain, But It Shouldn’t Be Scary

I don’t want to alarm you–I’ll leave that to the news media–but the Coronavirus will change the world we live in. The economic, emotional, and physical toll that this pandemic will have on society and the global economic has the potential to be astounding. It is already changing the way we work and educate and will most likely force us to re-assess your global supply chain and how we as a society can better detect future pandemics. There is going to be a lot of uncertainty in the months ahead, particularly in the markets, and no one knows when or how things will bounce back. As I said in my post from earlier this week, you could be as diversified as possible, but you will still feel some pain in your portfolio. However, if you’ve been smart with your investments–in other words, done your homework–and have a good understanding of your risk, then you’ve hopefully been able to minimize any damage. Furthermore, if you’ve got the time to really follow the markets, then you might even be salivating at the thought of being able to buy low and position yourself for any potential market rebounds. Regardless of what you are looking to do, don’t be afraid of the future. It can be doom and gloom now, but it won’t always be that way. Yes, we as a society will bounce back. It may take years and we may never quite reach where we were at a week or two ago, but we may come close. Just don’t give up. If your nest egg is struggling, take the steps you need to make it last. If you need to change your plans regarding when you will retire, then do it. If you are just starting to save for retirement and want to potentially build up a portfolio, now is a good time to do so. Just don’t be afraid of the future!