Staying the Course

The phrase “stay the course” is one of my biggest pet peeves. Where in life can staying the course be beneficial? If you stay the course in a chess match you’ll be in checkmate. If you stay the course while sailing you could wind up on the rocks. As Rick Warren says, “if you are coasting you must be headed downhill.”

Can I be frank with you? When you are told, “Don’t worry, the market always comes back”, that can be a lazy and uninspired response. The problem with that statement is it isn’t always true. There was a world power that had an aging population, a healthy real estate market, and a booming economy. However, after taking a nose dive their market took twenty years to recover1 . I am talking about the Japanese stock market (Nikkei). No market is guaranteed to come back in the same way.

In 2008, the Fed was able to lower interest rates, the government bailed out companies, and lowered taxes. Now the government is 25 Trillion in debt, they can’t lower taxes much more 2, and people hate the idea of bailouts. Also, remember in 2008 the market was only down for one year, all recessions are not the same.

When we see historic drops in the market we can forget these things are bound to happen. What can we do?

  1. Have a retirement income plan that covers your short term spending needs. One of the biggest mistakes you can make is to sell stocks to generate retirement income during a recession. We have helped some of our new clients work around their losses and utilize cash equivalents for income substitutes.
  • Don’t forget the rules of investing.Warren Buffet once said, “Rule #1 Don’t Lose Money, Rule #2 Don’t Lose Money.”  The golden rule of investing is to “buy low and sell high.” Don’t let your emotions dictate the rules.
  • Consider your 401k and changing your future allocations to more growth focused funds. With the addition of this new money, it is a great time to start taking advantage of bargain priced funds. With existing money, you could transition your 401k allocations from bonds and money market funds into equity focused funds.
  • Max all available retirement savings accounts through a 401K/IRA and/or Roth IRA. Confirm you have met all of your year-end contribution limits.
  • Roth Conversions – Taxes are historically low and thus are on SALE. When the market finally rebounds you will want to enjoy the growth tax free. This strategy can be accomplished by creating a structured transition of your IRA into a Roth IRA, via a Roth conversion. We enjoy having a joint meeting between you, your CPA, and Estate Planning Attorney. We call this process Total Wealth Management.

Now is not the time to turn on the news. This is a time to pray, reach out to loved ones, and a time to volunteer.  Go outside to absorb some vitamin D. Remember, to have breaking news something always has to be broken.  Take advantage of a second opinion and let us share with you our recommendations on how to change course.                      1  – 2

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM) and/or Swan Capital. AEWM and Swan Capital are not affiliated companies. Investing involves risk, including the potential loss of principal.  Any references to protection benefits, security or guaranteed income generally refer to fixed insurance products, never securities or investment products.  Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. No investment strategy can guarantee a profit or protect against loss in periods of declining values. A Roth Conversion is a taxable event and may have several tax related consequences. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA. 00574718

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