| |
If a terrorist event happened
right now, could your lifestyle be put at risk?
Retirees and those nearing retirement can’t afford to sit
around and be at the mercy of the market. If you want to
protect your comfortable lifestyle in the event of a
terrorist attack, here are three things you need to do:
Rethink Your Strategy. For years, investors have been taught
that the only way to make money in the stock market was to
buy quality investments and hold on to them for 10 or 20
years. This is referred to as the Buy and Hold strategy. It
may work if you’re 30, but can force you back to work if
you’re 70. It already has for millions of other retirees!
If you held on to your investments, it would have taken you
two years to get back to where you were on September 10th,
2001. If you were taking income off of your investments it
would have taken even longer. An investment of $100,000 in
the S&P 500 at the beginning of 2001 would be worth less
than $90,000 today—over 3 ½ years later!
For retirees, I recommend a Modified Buy and Hold strategy.
Buy investments for the long-term but only hold on to them
if they continue to perform. If they lose money beyond your
pre-defined comfort level, sell them. Focus on growing your
money in the good times but protecting it during the bad
times.
If terrorists strike again, or if the market starts to
decline significantly for other reasons, retirees must be
ready to take action and move their investments to safety.
Don’t stand by and let your advisor do nothing while you
lose money. Take action.
Rethink Your Investments. Flexibility is the number
one priority when planning for the unthinkable. The world is
a much different place today than it was even 10 years ago.
It’s vital that you are able to get at your money whenever
you want it or need it. Beware of any investments with large
surrender penalties or hefty commissions that limit your
flexibility to quickly and easily make changes to your
portfolio.
An Equity-Indexed Annuity is the perfect example of the kind
of investment you should avoid, both for these and many
other reasons. Unfortunately, mutual funds are also becoming
less attractive due to their increasing fees. The vast
majority of mutual funds now charge a redemption fee if you
take your money out before a set time period, limiting your
flexibility.
For instance, a well know real estate fund imposes a 2%
redemption fee if you pull your money out within 1 year. If
the market drops significantly before then and you pull your
money out you will have to pay an extra 2% penalty. Talk
about being kicked when you’re down!
In fact, I’m moving most of my clients out of mutual funds
and into Exchange-Traded Funds. In the event of a terrorist
attack, my client’s holdings could be sold and moved to cash
within a matter of minutes, whereas we’d have to wait until
the end of the day with a mutual fund.
Rethink Your Advisor. It’s important to have a
strategy in place now so that your advisor can
immediately act should something terrible occur. For
instance, my firm uses a proprietary patent-pending system
that constantly monitors each investment in every client’s
account. Each investment has pre-defined thresholds designed
to limit potential losses. If a threshold is breached, we’re
alerted and the investment can be sold.
Unfortunately, most advisors don’t have a pre-defined
strategy that will protect your money in the event of a
serious decline. In fact, very few advisors actively monitor
or manage your investments. Most follow the buy and hold
strategy mentioned earlier. If your passive advisor
keeps insisting you ‘just hang in there’, it’s a good bet
they won’t take action when you want them to. You need an
advisor who will actively manage your money.
Many retirees have learned the hard way that something was
wrong with the way their money was (or wasn’t) managed the
last several years. If you’re retired and concerned about
the risk of terrorism, it’s definitely time to rethink how
you and your advisor have been doing things.
Questions? Concern? I’d be happy to provide clear, unbiased
advice free of charge.
Mr. Voudrie is a Certified Financial Planner and the
President of Legacy Planning Group, Inc., a Private Wealth
Management firm in Johnson City, TN. For more information
call 1-877-827-1463 or email
jeff@guardingyourwealth.com.
|
|
|
