“The future’s uncertain but the end is always near.”
Jim Morrison, the Doors, “Roadhouse Blues”.
Many investors are losing valuable sleep listening to the misguided, canary-in-the-coal-mine commentators expounding on an imminent stock market crash due to a future recession (the “R” word). Paradoxically, if too many investors believe the same thing, as fate would have it, the “R” might just become a self-filling prophecy! On the other hand, the Wall Street axiom “a bull market climbs a wall of worry” may also suggest that too much negative investor sentiment may have the opposite effect and the market will continue to rise. It may make more sense to refrain from prognostications. The great investor Warren Buffett said, “Short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children." -- 1992 Berkshire Hathaway Chairman's Letter.
It’s the little things you begin with that matter most! The wisdom found in the Tao Te Ching says the long thousand- mile journey begins under one’s feet by taking small steps! If you are hiking and climbing a mountain you take one little step at a time. It is unrealistic to think you can physically run to the top.
With all the hype about the latest Avengers movie, it got me thinking about how we all can become superheroes in our every day lives. You may already be a superhero to your spouse, to your kids, but how can we become financial superheroes? Fidelity did a study a number of years ago. They looked at all of their accounts and they wanted to find out which accounts performed the best: what were the investments? How often did the account trade? How many “tweaks” did the account holder perform over this given time period? What Fidelity found out was very surprising. The clients whose accounts performed the best were the clients who forgot they had an account at Fidelity.
How do we know if we will have enough saved for retirement?
Over the last few decades, more and more workplaces left the traditional pension-retirement, and changed over to a more individually focused retirement plan, with the emergence of 401(k)s. Less responsibility is placed on the employer to ensure their employees have enough for retirement, and more responsibility is put on the shoulders of employees to ensure they are saving enough into their retirement plans to one day be able to replace their income. Recent studies have shown that one-third of baby boomers have no money saved for retirement. On top of that, boomers have more debt than previous retiring generations. They will have to spend more out of pocket on health care.[i] These are scary statistics. Cost of living has continued to climb, with food and housing costs up 60% from 1996. Education costs are rising, and have increased eight times faster than wage growth[ii], and medical and childcare costs have doubled over the same time frame.[iii] It is not merely the fault of the average person for not stashing enough away; people have less money in their pockets to allocate to savings!
The good thing is, with a little forward thinking, there are ways to improve our retirement outlook In this article, we will go over some steps that can help you to prepare financially for your later years.
Investment fads are nothing new. When selecting strategies for their portfolios, investors are often tempted to seek out the latest and greatest investment opportunities.
Over the years, these approaches have sought to capitalize on developments such as the perceived relative strength of particular geographic regions, technological changes in the economy, or the popularity of different natural resources. But long-term investors should be aware that letting short-term trends influence their investment approach may be counterproductive. As Nobel laureate Eugene Fama said, “There’s one robust new idea in finance that has investment implications maybe every 10 or 15 years, but there’s a marketing idea every week.”