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HOW WELL IS YOUR NEST EGG DOING?
The markets have been all over the place during 2007 and many folks are wondering just how safe is their nest egg. Here is what I can offer:The Dow started the year at about 12,400 and it is now over 14,000. Why are you worried? Because there have been large precipitous drops? There have been many before and most of the hype has been media induced. We have mechanisms to curb such drops. Did you know that the NYSE has stops to slow the markets if large drops occur?
There are other mechanisms the Feds use to stabilize markets. If you are worried because it is overly positive, you might have some valid concerns. The large increase currently enjoyed can't be sustained long term but may be warranted in the short term.
So, what is an investor to do? Have a good long term investment plan and stick to it. Don't try to time markets by getting in and out depending upon how markets are doing. Research proves you will lose money. Instead, look at diversifying your portfolio and making sure you have a good asset allocation that is consistent with your investment goals, risk tolerance and time horizons. In other words: proper asset allocation. But what exactly is that?
Simply put: Don't put all your eggs in one basket. You would no more go to the grocery store to stock up for a week and buy 20 pounds of potatoes and nothing else. So, why put all your retirement dollars in one or more stocks or assets classes? Spread it around a little. . . a few large cap funds comprised of some growth and value equities, some mid and small cap funds, some international and emerging market funds, some bonds, maybe some REITS and hey, why not go out on a limb and look for some international bonds or high yield bonds in addition to the short terms most people migrate to?
Most investors will look for something familiar. Healthcare professionals look for healthcare stocks and funds because that is what they know. Look for something different. . . out of your industry. Look for at least ten different asset classes and nothing healthcare. Did you know there are more than 115 different asset classes? You will likely earn more returns and take on less risk. And if you have several asset classes, don't be concerned if one or two are not doing well. Think about it: some have to be on the bottom so others can be at the top! It is the average return you should be concerned with. If still dismayed or concerned, seek professional help. After all, most people wouldn't diagnose their own medical problems. Let a retirement plan or investment specialist help you. Start with your employer 401k investment advisor if you have no one else. Be safe, do it sooner rather than later.
If you have any questions, or would like additional information, please contact Virginia M. K. Stanley at 505-998-3200.