Archive for October, 2008

Financially Troubled Times: Do What You Can

Published October 28, 2008 Financial advice Leave a Comment
By Douglas Goldstein, CFP®

 

Since you can’t control your investment returns, and since no one can predict the future of the markets, focus your energies on things you can control, such as your withdrawal rate and asset allocation. 

 

Sometimes the best reaction to a decline in the market is to spend less.  Depending on your situation, smaller withdrawals (at least in the short term) can give your portfolio time to recoup its losses.  After the recent market drop, one retiree called to tell me that even though he believes that eventually the market will recover, he’s feeling nervous since he’s dependent on his assets for income. He wanted to ask my opinion on whether he should replace an expensive cruise with more modest vacation plans.  Can you guess what my response was?

 

Rebalance?

Changing market conditions doesn’t necessarily mean that you need to make changes in your portfolio.  If your asset allocation remains in balance, then be prepared to wait out the volatility.  Also, if your portfolio value has dropped, consider doing tax-loss selling and then diversifying your portfolio with the proceeds. 

 

Don’t put your money into whatever product is boasting the highest yield.  Remember that “high returns” is usually synonymous with “high risk.” Retirees may be especially tempted to invest in potentially high-return (read higher-risk) investments, but don’t put more money in something risky than you can afford to lose. 

 

It’s hard to walk the fine line between keeping your assets in cash in order to avoid the need to sell stocks to raise income in less favorable market conditions, and investing cash in order to maximize returns.  Your cash balance should reflect your personal allocation model as well as the size of your budget.  Many things in the world are beyond our control.  Take charge of your asset allocation and withdrawal rate to do what you can to ensure your fiscal success.

 

Douglas Goldstein, CFP®, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA(formally NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.

Financially Troubled Times: Restructure Your Portfolio for Success?

Published October 6, 2008 Finance , Financial advice , Israel , Money management Leave a Comment
Tags: , ,
By Douglas Goldstein, CFP®

When the economy is down, companies often “restructure.” They scrutinize their expenses to see what changes will make them more efficient. Sometimes they’ll try to alter the terms of repayment of debt; perhaps they’ll close some divisions or lay off staff. Those moves would be considered defensive, and may be critical for the long-term survival of the corporate entity. But other restructuring could be considered strategic. A company’s CEO may see potential in a new marketplace; he might consider adopting a new technology to enhance the effectiveness of his staff; or he might look for another company that is also suffering and try to acquire it. A smart CEO knows that “bad times” is just a point of view, and could just as easily be referred to as “potential opportunities.”

Even if your business card doesn’t list you as CEO of a company, you may be the CEO of your family’s finances.  If your personal portfolio has savings, stocks, bonds, real estate, etc., you may resemble a corporation more than you know. When the media cries out about high oil prices, dropping stock markets and inflation, rather than panicking, put yourself in the place of a corporate president. Assemble your board of directors (which, in your case, might include your spouse, financial adviser, tax professional and insurance agent) and consider the opportunities:

Will the market go down forever?

If you think the market’s fluctuations will continue, try to think about the areas of the financial world that may begin to swing up soon. Are there good companies out there that have been beaten down and now are oversold? Just like one company might buy another (think of JP Morgan buying Bear Stearns), you can buy shares in a company on the open stock market. If you’re not sure which stocks to buy, you can use a money manager to do the research and make the decisions.

If you think of difficult times as a restructuring opportunity, you may find some great investments. Always remember, though, past performance is no guarantee of future returns.

Douglas Goldstein, CFP®, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA(formally NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book is available in bookstores, on the web, or can be ordered at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.