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In The Money September 17th, 2009

Articles that discuss the earning of money, the investment of money, the saving of money.

Asset Allocation

Mike Brandone


Whether you’re young or old, in retirement or near retirement you have been affected by one of the greatest market downturns in US history. The fallout of this downturn has touched everyone. Here are some facts to ponder.

• 43% of retirees are thinking of rejoining the work force (Longevity Alliance)
• 60% of American adults do not think the economy is improving (Rasmussen Reports)
• 72% of Americans hold a negative view of the Banking industry, up from 64% last year (Gallup)
• 73% of Americans are pessimistic about the economy in the first half of 2009 (Gallup)
• 31% of Americans worry they may lose their jobs (Gallup)
• 27% of Americans said they have more debt now than they did six months ago (Gallup)

What does this all mean? It means that Americans today are scared, confused, overwhelmed and nervous as to what their next moves will be as it pertains to their finances and their financial future. The sheer fact that most Americans spend more time planning their vacations than they do in the retirement planning process shows us just how deep the issues of savings and planning goes.

With all the hype from investment firms on retirement planning and savings, we still saw trillions of retirement’s savings dollars evaporate. Why? Because most, if not all, investors use either a buy and hold strategy or some form of asset allocation. Neither model protected investors in the recent global market meltdown. So here we are, the investing public, holding retirement and investment accounts that have lost 30 to 50% since October 2008. Let’s put these numbers into perspective, if your account was valued at $100,000 in October of 2008 and it lost 50% of its value to $50,000, you need to have that investment grow by 100% just to get back to your October 2008 values. If traditional investments. (Mutual Funds) grew at 10% a year you will be back to your original $100,000 in 2017, but you only reach the original number if inflation is zero during the time period. When we add 3% inflation to the time horizon of the investment returns or your original purchasing power (the same value of the $100,000 in today’s dollars) you will not get even until 2021 and these number are based a continuous growth rate which is impossible to predict. Can you wait that long to get back to where you where in 2008? If you have an advisor and if they are still in the business and if they have called you, what are they telling you to do? If you got the call, most advisors tell you to either hold tight or invest more. Where have they been for the last 24 months?

The new reality is that it’s not about asset allocation or diversification. It’s about performance. I did write in my last column about the benefits of asset allocation which is true and still very useful and relevant today. Our firm is still using asset modeling as a way to assist our clients on reducing risk, but we also help our client find newer solutions for growth and wealth management.

Retirement is more than not outliving your assets; it’s medical planning, insurance planning, it’s family planning, income planning and distribution planning. Items such as trusts, med-a-gap coverage, and 529 funds for grandchildren, income sourcing (which asset to use first to minimize taxation, etc.) and health care proxies are all areas where our firm works with our clients for their best opportunity for the highest quality of life possible. If you’re current advisor is telling you to hold or asking you to invest more or taking away your opportunity to have your assets grow, you should talk to us.

•••••

Mr. Brandone is the President of Horizon Financial Services, a retirement, financial planning and wealth management firm in Del Mar CA. For questions he can be reached at 858-259-0131, ext 313 or via e-mail at mbrnadone@torreypinessecurities.com

 

 

 

 

 

 

 

 


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