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.

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?

Having Money and Properly Managing It are Two Different Things

Just because you have lots of money doesn’t mean you’re necessarily a financial wizard. Society is littered with famous celebrities who have squandered massive amounts of money through various means, such as bad investments or poor spending habits. I’m not saying we need to be sympathetic to celebrities who make millions, but their stories, when looked at together, can provide an important lesson for all of us. That is, that having money and being able to properly manage it and care for it are two different things. In other words, just because you have money doesn’t mean you will know what to do with it. This can also be case for average, middle class workers that make up the backbone of American society. There’s also plenty of stories out there of retirees decimating their nest eggs once they reach retirement by spending more than they saved or making poor investment decisions. Here is where knowing what you don’t know is important. If you know you aren’t good with money, make sure you hire a wealth manager or certified financial planner who can help. They can help you set a plan and understand your appetite for risk and avoid investments that may not provide the right return for you as well as help you decide to dump certain investments that take a turn for the worst. A good wealth manager or certified financial planner can also help you to grow your nest egg by also suggesting investments that fit into your plans and meet your risk tolerance. It’s important that you find someone you are comfortable with and who you trust with your money. Now, I’m not saying here that all retirees don’t know what to do with large retirement savings accounts. Of course, there are also many stories of people out there taking a small sum of money and turning it into millions through smart financial decisions. Or of retirees being practical in retirement and making their savings last. However, it can be easy to get caught up in thinking that just because you have money means you know what to do with it.

Going It Alone Investing? Be Smart About It

Thanks to technology, it’s easy to become an investor these days. All you need is Internet access and a device and you can open a brokerage account. Such ease can be exciting and make one feel as though they have more control over their finances and future. However, it can also be dangerous. The ability to invest your money with the touch of your finger can also lead to a nonchalantness about investing and money. It’s not uncommon for people to get a bit carried away with investing when they first start using apps such as E*Trade or Robinhood. A quick search of Google can turn up tragic stories of individuals who got caught up in the thrill of investing only to find themselves suddenly out thousands of dollars. Some of those sites (*ahem* Robinhood) even make an effort to get people to invest in riskier investments (*ahem* options) not so much for the investors sake, but because it turns a profit for the platform owner. Remember, despite how much research and homework you do and no matter how smart you think you are, there will always be risk involved with investing. The key is knowing the amount of risk you are willing to handle and knowing when you should walk away. For some–mostly those of you reading this blog–that’s easy to understand and do. For others, though, it can be easy to be swayed by slick marketing and stories of massive gains made by mavericks in the markets (it’s hard to verify those stories sometimes though). What does this mean for you? It’s a reminder to be smart when you invest and read up on investments and strategies and platforms before putting money out there. You should also be sure that you can handle the losses that inevitably come with investing if you do it long enough. If you are new to investing, I encourage you to read up as much as possible about it and to take time to research your investments and the risk you can handle. If you need to, speak with a certified investment professional or wealth manager. And, of course, be careful, but above all, be smart!

The Stock Market is Emotional. That Doesn’t Mean You Have to Be

If you’ve been investing in the stock market over the years, then you’ve probably heard–and seen–that the stock market moves based on emotion. Things such as societal movements, politics, or financial predictions can force movements in the market to happen. This is also what makes the stock market–and other associated markets–unpredictable. If you don’t understand and respect that unpredictability you can lose a lot of money. However, you don’t have to use emotion to drive your investment decisions. In fact, you should try to keep your emotions as far away from your investment and financial decisions. Using your emotions to drive your decisions when it comes to money can lead to poor outcomes and to losses. Instead, as I’ve suggested more times than I’d care to count on this blog, you should educate yourself. Know your appetite for risk and research the stocks you plan to invest in. How have they performed in recent years? Is the company big or strong enough to survive slow business? Are you patient enough to stick through a loss for a long term gain? These are important questions and can help you to make smart, rational decisions when it comes to investing. I also strongly suggest you speak with an investment professional or a wealth manager or a certified financial planner if you have questions about investing or stocks that you are interested in investing in.

Scratching a “Risk” Itch

As I’ve mentioned in the past, investing can be a great way to grow your nest egg. With a good understanding of your risk appetite and your goals–both long-term and short-term–you can make investment decisions that can put your money to work for you. However, making cautious investment decisions can seem boring at times, especially making decisions regarding long-term goals (i.e. saving for retirement while decades away). It can also be tempting at times to play with the markets a bit and experiment with taking on a little more risk than you normally do. Now, I’m not suggesting you risk thousands of dollars or that you take on huge amounts of risk. Rather, maybe you should consider investments a little bit riskier than what you are normally doing. Use it as a way to test your comfort levels and possibly determine if you are ready for a change. Also, as with any investment, be sure to do your research and educate yourself on the stocks or investments you are looking to buy. If the risk is too great, don’t invest in it. I want to be clear, though, I don’t think you should be that risky with your retirement money or any that is vital to your financial survival. Remember, it’s pretty easy to lose money in the stock market. It’s a volatile place. Again, I’m necessarily encouraging you to go full-bore into that with all your money, however I definitely think it might be worth checking out if you have some extra money you are willing to play with. That means money you are comfortable with possibly losing and which won’t impact your financials to do so. If you are serious about investing and want to learn from first hand experience, this can be a great learning opportunity. Again, I strongly discourage using retirement funds or money you actually need to live for these investing experiments. However, if you have money to spare, even if it’s just a few hundred dollars, and you want to experiment with some riskier investments, I think it could provide a lot of knowledge. Of course, if you have serious questions about the investments you intend to make, you should speak with a certified financial planner, wealth manager, or other investment professional.

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.

Putting Your Appetite for Risk to the Test

Yes, it’s another blog post about investing. What can I say, it’s a very hot topic right now. Given how many Americans have retirement savings and nest eggs tied up in the stock market, it’s also a very relevant topic. When it comes to investing, risk is a big part of things. Your understanding of it and how much you are willing to take on are foundational when it comes to making investing decisions. Given the recent market volatility, it’s fair to assume that many Americans’ tolerance for risk are being tested at the moment. Most likely, yours probably is too, particularly if you have a portfolio that is heavy into stocks. Thus, now is a good time to re-assess your appetite for risk and to make changes to your portfolio if you find that your appetite isn’t what it once was. This will most likely be greatly influenced by your financial situation as well as how close you are to retirement. Most likely, you will find your appetite for risk decreased the closer you are to retirement, but there is also a possibility that you may find your appetite for risk has increased. If that’s the case, feel free to make decisions that may be a bit more aggressive. Now, if you find that your appetite has changed and you want to talk with a professional about what to do next or what the right moves might be, I encourage you to speak with a certified wealth manager or financial planner.

How to Handle the Stock Market Today

The stock market has been on a downward spiral for almost a week at this point, which has created a lot of worry among even the most amateur of investors. Most reports indicate that the fall is a result of Coronavirus concerns sweeping the globe at the moment, but there may be other factors combined with that. This downward movement–or market correction, depending on who you talk to–has done a serious number on many portfolios and retirement accounts and it’s unclear as to when or how things will recover. While you shouldn’t ignore the market downturn, just remember that you can’t use hindsight to make changes to your past decisions and there is nothing you can do to will a stock/investment to move upwards. Therefore, there is no point in worrying about what others are doing or what the pundits are screaming about at the moment. Rather than worrying about what others are doing or what the market might do, you should focus on making informed, educated decisions regarding your own investments and portfolio. That means doing research and understanding your appetite for risk and adjusting your investments properly. While you can use the news to educate yourself about what’s going on in the world, don’t let it drive your decision making. If you find that your still struggling to handle the market downturn, you should speak with a certified financial planner, wealth manager, or investment professional.

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.