June 30, 2010

To Plan Or Not To Plan, That Is The Question

You have seen the commercials on TV, what is your number?  You read and hear about financial planning all the time.  Here is the skinny. 

Of course, you need to plan if that means being somewhat fiscally responsible enough to put money away for your retirement and your kids college.

It does not mean however that you need to sit down with some guy with very little if any experience and plan your life down to the last penny so you come up with an arbitrary number, good grief!

There are just too many variables for you to even remotely plan that well.  It sounds good on paper and of course, the investerati, the brokerage and investments firms love it because they can charge you another fee and keep your assets with them because there is absolutely no way you are smart enough to do it on your own, did I already say good grief?

I provide workshops in this area and am shocked at what people think they need to do, how stressed they are and how many boxes they think they need to check.  No.  Dare I say that it is easy to plan, so much so that I wouldn't even call it a plan and certainly wouldn't charge anyone for the 'advice'.

June 11, 2010

Don't Assume That Time In The Markets Lowers Risk (because it doesn't)

Many investors think that you make the risk of stocks magically go away just by owning them long enough which is simply not true.  You hear it all the time, own stocks and think long term.

While everyone knows that since 1926, that stocks have returned approximately 10%, or 8% CAGR, that fact does not help someone who had their retirement invested 100% in stocks over the last few years.  Assuming they didn't get scared out near the lows of last year, they are still down 20-30% and possibly as much as 50%.

The moral of the story is do not buy what the investerati are selling, that is, do not subscribe to the idea that you have to own stocks.  If you do, be careful.  Invest only a portion of those investable assets in stocks.  Remember that bonds and CD's are just fine, not very sexy, but have to be a part of your portfolio, a big part of your portfolio, especially as you get closer to retirement.