I had a few clients yesterday asking me how I was holding up during the sell-off. Very kind, I thought. Interestingly, they were not overly concerned about their portfolios. I assume that was because we communicate about these things regularly and I go to great lengths to explain why our portfolios are positioned as they are. While the past week’s sell-off was unpredictable, it was not unexpected. Read that last sentence again- it was unpredictable, but not unexpected. Our portfolios were not overly optimistic, bullish and naively exposed to these dangers.
Not that these past few weeks have been encouraging- they aren’t- and in fact are quite depressing. But we have had a plan in place for a while and clients understand our plan of attack. As for me, I’ve been in these environments before. From a big-money cockpit, I’ve watched in real time the Asian meltdown/Long-Term Capital Management debacle of 1998, the dot-com bust, 9/11 and of course the recent financial crisis and it’s huge volatility. The important thing is not to panic. Turn off CNBC, stop checking your accounts frequently and don’t read too many headlines. That is, if you were prepared both mentally and in your portfolio.
I realize a lot of people don’t have a plan of attack; the past week did take them by surprise and they may not know what to do now. To that end, please contact me. I have never been self-promotional on this site and don’t intend to, yet it struck me that there may be readers who could use my help or know someone who does. Knowledge is power- understanding the big picture, having an appropriate plan of attack and executing that plan makes a big difference. There is light at the end of the tunnel if you know to avoid being hit by the train.
Snopes had a recent expose of this hair brained idea:
For a total cost of 40 Billion you could solve our financial problems. There’s about 40 million people over 50 in the work force. Pay them $1 million apiece severance with the following stipulations.
1) They leave their jobs. Forty million job openings
- Unemployment fixed.
2) They buy NEW American cars. Forty million cars ordered
- Auto Industry fixed.
3) They either buy a house or pay off their mortgage
- Housing Crisis fixed.
One of our original goals for The Long Run Blog was to explain or examine general misconceptions about money. In my introductory post, I wrote
“financial decisions are becoming more complicated and more important to one’s well-being at the same time. Traditional pensions are disappearing while self-directed 401Ks are on the rise. Businesses, salespeople and politicians twist, bend and contort economic statistics to sell you products or ideas. How can we tell fact from fiction?” Read more »
We left off discussing pensions with the concept of using IRA’s to save on your own instead of in a 401K. Let me start by reemphasizing the benefits of a 401K over an IRA. Four important things come to mind although there are more. Read more »
I remember as a kid hearing older relatives talk about getting their pension as in “Uncle Bob worked for them 35 years and now gets half his salary for the rest of his life”. For better or worse, those traditional “pensions” are slowly fading into history. These “pensions” are plans where your benefit is determined by a formula and guaranteed for life. As people live longer, these plans are becoming more expensive for companies to provide. They also have downsides such as the requirement you must work for the same company for 35 years. It is just not terribly common to be a “company man” anymore. In addition, what are the odds that the company you start out in is going to survive and prosper in what becomes a mature industry 35 years later? Read more »
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