Forget the Noise and Just Take Care of Yourself
We’re hearing a lot of ranting and raving in the financial media lately about stock market volatility, interest rates, the Fed, inflation, possibly no inflation, trade wars, bull markets, bear markets, corrections, recessions—it’s enough to make someone go nuts!
So take a moment, slow down, breathe deeply, and allow us to say something about all of this—it’s no big deal.
Trying to guess where stocks, inflation, and/or interest rates are going might make for interesting TV sound bites, but for the average investor, there’s very little payoff in getting obsessed with the big picture.
You can’t control the economy, you can’t control the stock market or which trends are affecting it, you can’t control interest rates or inflation—you can’t control any of it. What you CAN do is prepare yourself with a strategy to keep from making irrational decisions during chaotic market swings.
Rather than making guesses about future economic trends, try instead to just anticipate what the direct, personal effect on you would be if different scenarios were to happen. Are we in for a correction soon? Or perhaps a bear market? We don’t know. But if you’re young and contributing to your 401(k), you might be okay with that. Why? You may be able to buy cheaper shares and dollar-cost average. But if you’re nearing retirement, perhaps your strategy is to carve off a section of your portfolio and put it somewhere with less volatility than stocks.
And what about interest rates? What if they go higher from here? Well, if that’s the case then there’s probably some measure of inflation in the economy. For someone who is relatively young, is secure in their job, and has a stock portfolio and a 30-year fixed-rate mortgage, a little inflation may be good. Your salary could rise, your stocks may go up, and you could pay off your home loan with cheaper dollars while the value of your home increases. But if you’re older and looking to generate retirement income, you may want to consider owning some investment real estate, Treasury inflation-protected securities (TIPS), bond ladders, or even certain fixed indexed annuities, which may benefit from a potentially rising stock market.
We say that the best thing you can do is to have a strategy that aims to take reasonable protective measures based on your individual circumstances. Meanwhile, forget the noise and the pundits. Let them worry about the big picture while you look out for yourself.
If you need help creating or fine-tuning your strategy, give us a call. We’re here to help!
Information presented should not be considered specific tax, legal, or investment advice. You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal. This material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed.
Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy (including the investments purchased and/or investment strategies devised by LCG) will be either suitable or profitable for a client's or prospective client's portfolio, thus, investments may result in a loss of principal. Accordingly, no client or prospective client should assume that the presentation (or any component thereof) serves as the receipt of, or a substitute for, personalized advice from LCG or from any other investment professional.
A dollar cost averaging strategy does not guarantee a profit or protection from loss. Since such an investment plan involves continual investment in securities regardless of fluctuating price levels, you must consider your willingness to continue purchasing during periods of high or low price levels.
Treasury Inflation-Protected Security (TIPS) is a Treasury bond that is indexed to inflation to protect investors from the negative effects of rising prices. The principal value of TIPS rises as inflation rises. Inflation is the pace at which prices increase throughout the U.S. economy as measured by the Consumer Price Index or CPI.
It is important to keep in mind that investments in fixed income products are subject to liquidity (or market) risk, interest rate risk (bonds ordinarily decline in price when interest rates rise and rise in price when interest rates fall), financial (or credit) risk, inflation (or purchasing power) risk and special tax liabilities. Interest may be subject to the alternative minimum tax. Treasury securities are backed by full faith and credit of the U. S. Government but are subject to inflation risk.
Fixed indexed annuities are complex, long-term investments designed for retirement purposes. Guarantees are based on the claims paying ability of the issuer subject to their terms and conditions. Generally returns are based on a market index and are limited such that an investor does not fully participate in market performance. Withdrawals may be subject to surrender penalties or foregoing benefits if withdrawn prior to the contract term. Investors should speak with a financial professional about the contract’s features, benefits, risks, and fees, and whether the contract is appropriate for the investor based upon his or her financial situation and objectives. Withdrawals prior to age 59 1/2 may be subject to a 10% penalty tax in addition to income tax. Annuities are not FDIC insured. Certain terms and conditions apply, so please read insurance company materials carefully. Insurance products offered through Lucia Securities, LLC (CA Insurance Lic. #0H40817)
Rick Plum is a registered representative of, and offers securities through, Lucia Securities, LLC, a registered broker/dealer, member FINRA/SIPC. Advisory services offered through Lucia Capital Group, a registered investment advisor, and an affiliate of Lucia Securities, LLC. Registration with the SEC does not imply a certain level of skill or training.