So have you thought about what changes 2012 might bring to your retirement nest egg and income plan? I haven’t posted in a while but that doesn’t mean I haven’t been thinking about our economic future. Indeed, I have been contemplating what moves to make, if any, between now and the end of the year to plan for what lies beyond.
No matter the what is happening in world political and economic affairs, you can generally find optimists and doomsday predictors competing for attention among investors. The optimists are usually mainstream investment gurus who make money when people are optimistic and buying stocks. The doomsday category is occupied by gold bugs, conspiracy theorists, and forecasting experts who rely on historical trends. I tend to read the latter types. Sometimes its merely entertaining. Other times I learn something helpful.
Paul Farrell at Market Watch is usually a good source of doomsday predictions, as he was today. He poses this question to readers like us:
Are you going to keep betting your future on winning 10%, hoping USA Today’s short-term thinking “strategists” are guessing right? Or will a “historic world-changing event” crush the American economy, markets … and your retirement?
Farrell goes on to list ten different “triggers” for a potential doomsday meltdown of the economy. Some sound plausible, others not so much.
But this is how I look at it: Am I willing to risk a collapse of our financial assets and retirement plans if one or more of these triggering events occurs? If not, am I willing to surrender an opportunity to fully participate in a 10% or more increase in the market?
My answers are no, I am not taking that risk and and yes, I will accept lower market returns to protect our assets.
But I won’t take all of our money out of the market because (a) we won’t need all of that money in near term and (b) the risk of financial catastrophe is not that high.
I encourage you to read the Farrell article (linked below) then ask yourself these same questions.