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We'll show you how to get a better understanding of the markets and become a confident, competent investor. And we lay it all out for you in plain English (well, a Southern variety of English, anyway). Hey, you work hard for your money - learn how to make your money work hard for you!
Big Events and Your Portfolio
As the smoke and dust clears from the ‘war’ that was the 2016 Presidential Election, many investors are scratching their heads, trying to decide what to do with their portfolios. They wonder which way the stock market will go under a new – and likely very different – administration. Some made adjustments to their portfolios ahead of the election, some after. Neither move was very smart.
Market timing (trying to guess which way the markets will move) has never worked out too well for us little guys and gals. That’s because we are usually…guessing! And that’s because we are just too busy working, raising a family and keeping the household running to find the time it takes to become an expert at analyzing every possible market scenario. Guessing is not investing.
What should us little investors do when faced with these types of big events?
> Nothing. We should already have our portfolios set correctly.
> Why? Because we are trend followers.
Besides being simple, time saving and powerful, using a trend following investing method takes the guesswork out of managing our moolah. And when we combine trend following with proper asset allocation, we can make our portfolios almost ‘big-event-proof.’ We don’t have to be market gurus to make money!
You could say that big events fall into two categories: the ones we know are coming (our elections, the Brexit vote, etc.) and the ones we can’t know are coming (terrorist attacks, natural disasters, etc.). More times than not, if we have our portfolios aligned with the current major market trend, neither type of big event will have any long-lasting effects on our investments. In fact, as we look back we can see that big events often move markets further along their current trend. Here are two examples:
1. Before the housing bubble totally destroyed the markets in 2008, stocks were already trending lower; trend followers avoided the pain that most investors had to endure because they had adjusted their portfolios to align with that downtrend.
2. Before the June 2016 Brexit vote startled the markets, the stocks were trending higher; investors who had their portfolios aligned with that uptrend fared well through the brief market turmoil.
Along with the usual election coverage this year, we saw news outlets constantly reporting the market fluctuations that occurred with each new poll result or bit of breaking political news. Sometimes, these prices quickly moved up or down 2-3%! These moves were the result of investors/traders re-positioning their portfolios based on who they thought would win or lose the election. In other words, they were ‘market timing’ to the max!
Market timing is a bad investment method for us working folks. To the other extreme, buy-and-hold is a method that can put a hurting on our bottom lines (and nerves!) when we least need it. In our opinion, a basic trend following method, along with good asset allocation practices, works best for long term investors. Trend following takes the worry out of big events - and what to do about them.
NEWS YOU CAN USE
"Some Fund Companies Missed
the News About Falling Fees"
"Hedge Fund Love Affair is Ending
for US Pensions, Endowments"
"Introducing the Morningstar Analyst Rating for ETFs"
"IRS Announces 2017 Retirement Plans
Contributions Limits for 401(k)s"
"Vanguard's McNabb Said Cost
of Investing Will Keep Falling"
VIEWS YOU CAN USE
"Top 3 Advantages of Managing Your Own Money"
from The Motley Fool
"The Best Personal-Finance Products, Services,
Resources and Advice of 2016"
"Hedge Funds Slow to Adjust
Champagne Tastes to Beer Budgets"
"The Case Against Traditional Indexes"
"7 Retirement Planning Steps Late Starters Must Take"
Fall Reading List
The days are getting shorter - why not take advantage of the longer evenings by boning up on your investment know-how!
These 4 books are sure to help!!
>>>>> And just so you know:
Clicking on these book images takes you to Amazon.com via our affiliate link. You won't pay a penny more for what you buy, but we do get a few coins for sending you there - and that helps us cover the costs of keeping our website running free!
Here are a couple of very simple retirement calculators courtesy of our friends over at Calculator Pro.
Here are the figures we used:
> Required Annual Income: we put in what we're making now (we don't buy into that "plan to spend 70% of your working income in retirement" idea!)
> Years until Retirement: we shot for age 65, but who really knows, right?
> Years after Retirement: we sure hope to have 20 good years of doing what we want to do!
> Annual Inflation: we used 3.5% (maybe go a tad higher to be safe?)
> Annual Return on Balance: we used 7% (maybe go a tad lower to be safe?)