Did the Market just give us a gift?I wanted to share a video that illustrates what I was saying back in February. In my post here, about bonds, I was discussing the importance of changing your allocation and taking advantage of trends based on what the market is giving you. Once you enter retirement you may be relying on Stocks more than you think to achieve your desired income as interest rates are low and may be stuck lower for longer.
At that time, the market was one day from all-time highs and, I had suggested being ready for what may come; however as you all know I do not predict what the market does next. Although it looked obvious the market was going to get tired and that bonds were showing us some underlying fear, in reality, a virus ultimately was its undoing in the end.
If I told you that we could go back in time and sell that day we would all take that gift. As I write this today, maybe you have not looked... The SP500 Index, my choice guide, is only 14% from the February highs! This is surely surprising as we have shut down most of the country for over 2 months and things will be slow to recover.
So where does this leave us? As I said above I don't predict, and I will still allow assets and trends to guide us; however, I am not very comfortable here and suggest starting or investigating these actions listed below. With market returns projected to be on the lower end of historic averages and bonds yielding near nothing, we need to realize we are in for a different retirement plan than many of us originally had.
We need to consider the following:
- Opportunistic rebalancing
- Creating fixed income streams
- Use alternative tools such as structured notes
- Adjust portfolio with lower volatility holdings
- Decide what your core portfolio percentage is
(The long term Core holdings you will not touch)
The video below suggests how devastating retirement portfolio dips can be; therefore, it is very important to plan for such occurrences as you will most likely experience a handful in a 30-year retirement. Most importantly when they happen is a factor that can change your retirement trajectory forever.
I wish everyone well and hope you and your family are staying positive and healthy. Take care.
The Agile Investor is a blog that focuses on being prepared and informed on the topics of wealth management, investments, financial markets and investor psychology. I partner with people to help them achieve the conviction needed to obtain financial independence.