Shownotes Transcript
You don't like to lose money. Nobody does. That's one reason it is so hard to stick to a long-term investment plan when we feel like we're getting punched in the face by the markets. Just like a boxer, it's natural to want step back and protect ourselves. This natural reaction, however, has caused most investors to* underperform* the very assets they invest in. In this episode, I discuss 7 steps to help you fight through a normal market correction. Invest Wisely: 7 Steps to Fighting Through a Market Correction
A 2014 Dalbar Study ) once again showed that average investors drastically underperform the very assets they invest in. Over the last 10 years the average investors, investing in a mix of stocks and bonds, had an average annual return of 2.6%. Over that same period, the S&P 500 had an average return of 7.4% and fixed income averaged 4.6%.
One of the biggest contributors to this is our natural reaction to run from pain. It's a strong instinct that I struggle with during every market downturn.
In this episode, I introduce 7 steps you can take to help fight through a market correction so you can invest wisely for retirement.
- STOP listening to financial media and market "experts." They only magnify your fear
- Learn the nature of the markets you invest in. Develop a clear understanding of how they work
- Determine your appetite and need for market risk. How much volatility can you stomach? How much market risk do you need to achieve your goals?
- Set a portfolio allocation that fits your needs.
- Rebalance it religiously to manage your risk and potential return goals
- Maintain enough cash reserves. This will help your long-term assets be focused on long-term objectives
- Revisit steps 1 thru 7 religiously to adjust as your life unfold.
Not sure how? Find someone to help).
Investing wisely is easy to understand. The hard part is sticking to a well thought out plan when you get punched in the face by a market correction.
Plan Well: Budgets That Work With Jim Munchbach
Recently I had the pleasure of talking with Jim Munchbach from imakeyourmoneycount.com) about how to find a budget that works for you. Jim is a Certified Financial Planner, State Farm agent) and instructor of Introduction to Personal Finance at the University of Houston.
Here are some of the topics we cover:
- Why it's important to track your spending
- Finding the truth about your financial behavior
- A budget that works), if you hate to budget
- How a budget helps you create free cash flow in order to save
- The value in learning to track your spending
- It's not the tool that is important, its the goal
- How to manager your cash flow like a business
- The law of spending and saving
Retirement Toolbox: Retirement Planning Worksheet This worksheet may help you determine if your current retirement savings effort is on course or if you need to chart a new direction to help reach the retirement destination that you desire. To help you, I’ve added a new worksheet to the Retirement Toolbox titled *Retirement Planning Worksheet. *Click Here to Access)