Just as it pays to establish an escape route from your home in case of a fire, it pays to establish a disciplined plan of action pertaining to your investments, all the while keeping in mind that panic is not a strategy. It is with this in mind that we thought it was timely to provide a ten step program that might help you navigate these turbulent investment waters.
Step number one. Assess your current financial situation. Items to include your income, perceived job security, details of your pension plan, projected Social Security benefits, insurances (life, health, disability, property and casualty), real estate values, mortgage information and other debt.
Step number two. Get an historical perspective on this period in history. Is it really different this time or are in a phase in our history that will pass? Keep in mind that the stock market generally moves up over a twelve to twenty year period with mini bulls and bears contained within and then moves sideways over the next period with mini bulls and bears in between. Until further notice and most likely until monetary policy becomes substantially more restrictive, we believe that we are in an upwards trending market and have been so since early 2009.
Step number three. Given the above, begin to determine your appropriate asset allocation. Some rules of thumb include the older you are, the more fixed income (bonds) you should include in your portfolio. The more guaranteed your pension plan, the closer you are to realizing the benefits of that plan, and to what extent that pension plan along with Social Security will…
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