The Retirement Guys: Protecting what mattersWritten by Nolan Baker Mark Clair | | firstname.lastname@example.org
The stock market indexes many of which finished the year with a bang, reached new record levels in 2013. Thanks to an incredible year in the stock market, many equity investors have seen gains in their accounts as they begin to review the year end statements. Bonds, on the other hand, saw their first negative total return since 1999, with a 2.0% drop in the Barclays Capital Aggregate bond index according to BTN Research. Before you follow investment predictions for 2014, consider taking these steps to protecting what matters.
It is very possible that the stock markets could continue going up in 2014. There has been 18 times that the S&P 500 index was up over 20% in a year since 1945. The following year the markets were up 80% of the time, according to S&P Capital IQ. The Federal Reserve also plans to continue the monthly bond purchases in 2014 buying up to $75 Billion dollars a month. This should further support continued economic growth in 2014.
The challenge with investing in the stock and bond market is that history doesn’t always repeat itself. Global and economic changes can occur at anytime that can quickly change the direction of the stock and bond market. Predications about the performance of the stock and bond markets return are often wrong. Simply put, short term, no one has control over the markets. Instead, it is good to stick with fundamentals and make sound investment decisions based upon where you are at right now and where you want to be in the future.
Protect gains. It has been over 800 calendar days without a 10% or greater drop in the S&P 500 index. This recent increase in stock prices makes it one of the longest without a double-digit decline in decades. Investors should review the total performance of their investment accounts every year. Some investors look at performance daily, while others rarely look at the performance of their investment accounts. In our opinion, it is always good balance to look at investment accounts at the start of the New Year. Although every investor’s situation is different, while the stock market had a record year and is at a record increase in price, consider locking in profits and move the profits into principally protected accounts, before a decline occurs. Remember, the fundamentals, buy low and sell high.
Pay off debts. Proverbs 22:7 says the borrower is the slave of the lender. No matter an investor’s religious beliefs, having debt especially in retirement time can put an investor and his or her family at much greater risk and stress in the future. In our years of experience in working with retirees, a common factor among those who are much more protected against risk is the fact that they are debt free. It can be easy for an investor to want to spend money while times are good and the investment statements look great, but don’t. Avoid the urge to spend and add more debt; in fact, do the opposite pay off debts while times are good.
Protect income. Most investors we talk with have the ultimate goal of generating retirement income to live off either now or in the future. If an investor took the steps we just mentioned and paid off debt, that is a great step in protecting income by lowering the amount of outgoing monthly obligations. But don’t stop there; look for ways to protect even more income by review investment accounts.
Investing involves two components growth and income. When the two are added together an investor ends up with total return. Don’t focus on growth alone; instead do a review of the predictable income that is being generated from each investment account, sometimes called the yield. Not all investments provide income and instead focus on growth alone. While other investments provide income, but have little opportunity for growth. Income producing assets to review include stocks, bonds, mutual funds, bank CD’s, alternative assets, and annuities. If your goal is income from your investments, make sure you review how to protect and or increase your investment income for 2014.
For more information about The Retirement Guys, tune in every Saturday at 1 PM on 1370 WSPD or visit www.retirementguysnetwork.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc. does not provide tax or legal advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. 419-842-0550
Tags: alternative assets, annuities, bank CD's, Barclays Capital Aggregate bond index, bonds, BTN Research, debts, Federal Reserve, gains, investing, mutual funds, protecting income, S&P 500 index, S&P Capital IQ, stock market indexes