Nothing feels better or easier, for that matter, than being invested in stocks when they are going up. The problem arises, however, when the market decides to take one of those classic corrections it does every year or two. When we get those, we get a little anxious wondering if this is the big one and start second guessing ourselves. The real problem is when we get one of those calamities that shaves off 30, 40 or 50%.
Those are the devastating ones because if you lose 50%, you have to make 100% just to break even. And making 100% on your money takes a long time. It also requires you to be invested far more aggressively than you should be. If you are retired or in that retirement red-zone, it could mean the difference of working an extra 5 or 10 years or having to cut way back on your lifestyle. Neither sounds that fun to me, so don’t let that happen, OK?
These big drops used to take decades to re-occur, and will once again once we get back to a normal economy not manipulated by the Federal Reserve. However, when you have an economy such as we have now where the demographics are heavily against us, as I discuss in Facing Goliath – How To Triumph In The Dangerous Market Ahead, the response is either to let the free market economy settle where it should or to manipulate it through economic stimulus and quantitative easing. The first is more painful up front but takes a fraction of the time. The latter delays the curing by creating bubble after bubble.
The latter is where we are now and have been since the demographics started turning down in the late 90’s. Since then we have had stock market crashes in 1998, 2003 and 2008, all created from Fed bubbles.
The issue is that an economy needs spenders to grow. Statistically, people spend the most from about 33 to 48. When you have an aging population that cannot consume what its previous generation did, the economy shrinks. The baby boomers were 90 million strong, followed by the GenXer’s who are only 65 million in size.
The Fed can fight it for a while, but eventually the mountain becomes too high to climb. That’s why we’ve seen trillions of dollars in stimulus and increased debt, but an economy that is just limping along. On the plus side that is also why we’ve seen no inflation.
Are we in another bubble? You bet your booty we are. So when is the next bubble going to burst? It’s going to occur exactly at…hold on, I have to get the door.
Of course the key is for you to always take just the least amount of risk than you absolutely have to in order to get the returns that you need to achieve your goals. Most people don’t know how to calculate their risk or optimize their portfolio or how to build a portfolio that gets the best returns with the least risk possible. Go see your qualified retirement advisor and have them perform a Retired Income and Tax Strategy Analysis as well as a Stress-Test on your portfolio so you can see how your investments will perform in any market that comes our way so you don’t get crushed in the next inevitable crash or correction.
…… and that’s where we can help. To learn more about The Springer Investment Approach, which is our powerful proprietary Investment Management Strategy designed to manage risk and deliver returns in any market, or to get a free second opinion on your portfolio, simply reply to this email, or give me a call at 916-925-8900 for a no-cost no-obligation today!