Stay Put (in the Market)!

Recently, many of my clients have asked me if they should get out of the market due to the increased volatility over the past few weeks. Interest rates go up, interest rates go down. Stocks go up, stocks go down. My resounding answer to the question of whether or not to abandon ship during the crazy tide is’¦

Don’t get off this roller coaster ride!

Many of us have a tendency to get a wild bug up their “you-know-what” and mess up when things show sign of change. All too often, we get into the market when things are good ‘“ in other words we “buy high” ‘“ and we tend to get cold feet and jump out of the market when things are bad (sell low). I am no fortune teller, and I cannot predict exactly what will happen or when (if I could, I probably wouldn’t be writing this from my condo in Sherwood, Oregon ‘“ more like off the coast of Tahiti), but I can tell you that the best strategy I have learned in my almost 8 year tenure as a licensed financial advisor is to get involved, stay involved and stick to a strategy. Now, 8 years is not that long and certainly doesn’t span too many business cycles (although I was “fortunate” enough to learn from the market crash, post-9/11), but it does give me some credibility in the area of diversification and asset allocation.

I even came up with a rap that I would like to share with you. Think of the beat in the tune of Young MC’s “Busta Move.”

You’re on a mission

And you’re wishin’

Someone can improve your financial position

You may have some stock

You may have some bonds

You may know together they make a Mutual Fund

But here’s one thing that you might not know,

It’s all about your portfolio

And how to make it grow (no guarantees, of course)

It’s called Asset Allocation

And Diversification

It helps beat inflation

Today, in my written presentation

There’s one other thing that I’d like to share

It’s about the insurance called

Long ‘“ Term ‘“ Care

My name’s spelled

M-A-R-C

D-E-L-P

H-I-N-E

And I make it easy

To talk about money

Financial Planner, Ya’ll!

Ok, so as cheesy as it is, you should remember the most important information involved.

Protection is not about the bank. It’s about covering bases so that in your journey to move forward, you don’t move backwards. I would suggest you take just a few moments with your financial advisor or even by going online yourself ‘“ to a credible source ‘“ and map out an Asset Allocation strategy that is well diversified and covers multiple asset classes as well as being in accordance with your investor profile (how much of the “ups and downs” you can stomach). By exercising a proper asset allocation strategy that fits you, there should be a greater likelihood of you achieving your financial goals. Do not panic if you see the market fluctuating on a weekly, in fact, daily basis.

The second element of the rap was Long-Term Care Insurance (LTCI). I have written about this in the past and while you should consult a tax accountant or other qualified professional in your area that is licensed to provide tax advice about the tax advantages of LTCI, the benefits of having the insurance itself extend far beyond tax. The need for LTCI when it is not available will wipe many families out, much worse, eventually the government. Having LTCI also passes the responsibility of payment from you to an insurance company that will provide in upwards of hundreds of thousands of dollars for your need, rather than wilting away your retirement. Furthermore, and depending on your investor profile, you may be able to proactively plan with more aggressiveness in the market, thus (historically) having a greater chance at increased market exposure and performance.

Now, in order to win, you have to play. In order to play, you should be prepared. I do agree with that. But don’t get out if you are already in and if you are sitting on the sidelines, get in!. Many people wait for the “right time” to invest. When is the right time? Now! Below is a list of my favorite excuses as to why people don’t. Let me know if you are one of “these types” and I’ll tell you the same thing. You can!

Typically I hear from the 18-30 age range that:

“I can’t invest now, I’m just getting a start in life. I don’t make much at all (yet) and I should be able to have some fun while I’m young. Look at how much time I have and just wait until I have a higher income. Then I’ll invest”

Then from the ages of about 30-45 I hear the same BS, just better excuses. It is from them I hear:

“I can’t invest now; I’ve got a family to raise. With kids and a house, this eats up all my money. My paycheck goes to keep things going. Just wait until they get out of the house. Things should be cheaper then and I will be able to invest.

With age comes wisdom and even better excuses. Between the 45-55 age range, I hear:

“I can’t invest now; I’ve got two kids in college. It’s all I can do just to pay their expenses and the mortgage. I’ll throw you one further, I had to borrow for their tuition last term. This is the most expensive period in our lives right now. There is no room to invest.”

And finally, those who made it to the golden years, often sing to the beat of just one drum. They may just be parents or grandparents of yours who, for all the valid excuses in the English vocabulary suggest that they can’t invest now.

“I’m living with my children. The Social Security check doesn’t cover even my medical expenses and I don’t want to live in one of those Medicaid or Medicare facilities. I wish I had saved long ago’¦too late now.”

Even those excuses don’t make me bleed from the eardrums like the most annoying excuse for a young, aspiring political activist like myself. The worst, by far to me, is:

I can’t invest now, I have to wait ‘˜til after the election.”

 

Arrrrrrrrrgh!

It should all be ok if you just get in and stay in. Remember, those who have stayed in over the past 50 years, regardless of the ups and downs will give you the same advice. Learn from the past and stay in for the future.