Can Your Portfolio be Protected From a Plummeting Stock Market?
Yes it can! There are only two kinds of money - dollars at risk and dollars not at risk; described another way, an investment portfolio and a savings account. Savings accounts may be described as an interest bearing account that is guaranteed to be worth more tomorrow than yesterday and most of these types of accounts center around banks. Passbook accounts, CD's, interest bearing checkbooks, just to name a few. The Federal Government offers US Savings Bonds of various kinds and lastly, insurance companies offer fixed annuities, a tax-deferred accumulation vehicle that is designed to grow every day and at some point in the future, allow for either systematic withdrawals or a guaranteed income for a period of time that you can select such as you're the rest of your life. The advantage of a compounded rate of return growing tax-deferred over a large span of time, as compared to a taxable alternative is powerful and should be studied, understood and embraced.
On the other hand investments such as stocks and bonds have the possibility for loss; loss of investment gains and even loss potential of the original principal. Knowing this, why would anyone choose an investment over the safety and security of a savings vehicle? Answer - because of the opportunity for a greater return! That makes sense, if you want the possibility to earn more than a typical savings vehicle, perhaps even double or triple. However, you must accept the fact that you might lose some or even all of your investment. This scenario presents an interesting dilemma. I ask you, will greed get the better of you or is a calculated risk a risk worth taking? Obviously, for tens of millions of American's who invest in mutual funds, individual stocks and bonds and their 401k's, the risk is worth the reward. These people have chosen that the risk of losing money in the short-term was trumped by the risk of running out of money before running out of life.
With the advent of corporate pension plans going the way of the dinosaur, our government has placed the burden of retirement planning directly on each of us, yet, at the same time neglecting to educate the public on how to properly allocate a 401k program or how to design a diversified long-term investment portfolio. The government never demonstrated adequately to the public why they must contribute to and accumulate their own retirement funds, nor maintain an acceptable and prudent withdrawal pattern during the retirement years as not to seriously impede or destroy the account value. Believe it or not, there are some folks working at companies that offer a matching program for 401k contributions and don't take advantage of it! This is obviously a severe mistake.
Designing an educational program on how to pick a stock or bond and how to manage your portfolio hasn't arrived in the High School classroom yet either. The government expects all of us to become self-taught financial advisors and leaves it to us to educate our children in the matters of finance such as retirement and estate planning, long-term-care planning and tax reduction planning.
This predicament leaves the public no choice other than to some how become highly educated in these matters or to trust a retirement and estate planning specialist. A good way to size-up a financial advisor is to see him or her conduct a financial planning seminar or workshop. In this way you can make the decision in a public, non-threatening environment, how he/she presents them self and if you are motivated enough by the presentation, to schedule an appointment to visit with that professional. I happen to like this form of 'blind date' between seminar attendee and potential financial advisor and have created just this type of forum, with great success. With this thought in mind, I would encourage the readers of Life & Leisure to attend the American Prosperity Group Workshop Series the next time it is advertised in this and other local papers. However, I would recommend that you avoid the programs that offer a free meal for attending. The problem is that most of these seminars are attended by professional 'free meal eaters' and usually not people seriously searching for information first and foremost. For me, I would rather surround myself with people hungry to learn something new, exciting and essential to their financial success, than people looking to eat free food, wouldn't you?
The title of this editorial is: Can your Portfolio be Protected From a Plummeting Stock Market? Fortunately, there are strategies, techniques and financial products when combined, offer portfolio protection from the 5 potential forces of Portfolio Demise: Liability, Health Care, Long-Term-Care, Taxes at Death and Stock Market Losses. Unfortunately, the editor says I'm out of space to print them at this point in the column. No matter, I'll share them with you anyway when you attend an APG workshop or by securing an appointment here at American Prosperity Group Headquarters, both with no cost, no obligation, no kidding! Perhaps you're skeptical and doubtful that this can be done? Good, let that be your motivation to come and learn more. An APG Retirement and Estate Planning Workshop is in the planning stage so watch for our flyer in an up-coming issue of this newspaper and keep reading this column for details and more timely financial information. To learn more about Retirement and Estate Planning from the comfort of your own home, check out our website: www.1APG.com and visit often as the content is constantly updated.