Will your retirement portfolio last as long as you do?

February 5, 2019

When I was a kid in New York City, a series of television public service announcements featured a somber announcer intoning, “It’s 10 p.m. Do you know where your children are?”

I was reminded of those commercials as I considered the utter disarray of many investors’ retirement portfolios. I commend those of you who have done the hard work of saving, investing and anticipating that day when you’ll be able to leave the workaday world and enjoy a (hopefully) more relaxing chapter of your life.

As you approach that day of retirement, it’s more important than ever to ascertain whether your investments are arranged to sustain you through a ripe old age. Your portfolio must generate enough income to cover your lifestyle spending needs through age 100.

Planning to live to the century mark is just prudent.

Your investments must also be structured to weather all manner of market and economic cycles that will certainly occur between now and the time you leave this earth.

Unfortunately, most investors don’t have an investment philosophy, or a systematized way of allocating their stocks, bonds, cash or other holdings, such as annuities.

Here are some of the approaches that I typically see, and why these are detrimental:

The ostrich approach: This happens when investors bury their heads in the sand and ignore their investments altogether. On the one hand, it’s good to avoid obsessing about the market’s day-to-day movements. This hypervigilance can result in over-trading, which is a well-known drag on overall performance.

However, there’s a downside to neglecting your portfolio entirely. As an investor, every single holding should have a job. For example, domestic large-company stocks have a different risk-and-return profile than emerging-market small-company stocks.

It’s important to know if the ones you hold are too risky, if they are too expensive, and if your investments are balanced with the right mix and types of stocks and bonds.

The market timing approach: Do you feel that it’s judicious to buy and sell your investments based on economic reports or a forecast you saw some pundit discussing on TV? After all, these experts must know something you don’t, right? Well, maybe not.

Remember the widespread fears of rampant inflation after the Federal Reserve implemented its program of quantitative easing, or purchasing government securities from the market? I recall near hysteria in 2009 as the chattering class insisted that hyperinflation was certainly in store. As we all know, that never materialized. Prices rose slightly, but inflation remained muted.

So be cautious following investment advice from those who are supposedly have some kind of crystal ball the shows the market’s future.

The “I have a hunch” approach: This is when you shuffle your investments — or sell out and go completely into cash — because you are worried that something bad is about to happen. Often, this is due to concerns about the current political turmoil. I have seen too many people sell out because they dislike the political situation, and then later regret it.

Panic selling is the opposite of an investment philosophy. So is buying because you “believe” that some investment or other is destined to skyrocket. In either case, investors are going by their own opinion or views of the current landscape, whether political or economic.

If you follow hunches, you might be right or you might be wrong, but there will likely be no consistency to your investing actions, and you will probably end up with a collection of “stuff” in your accounts and no discernable strategy designed to meet your financial goals.

If you want more insights into investing for a secure retirement, in a way designed to weather all market cycles, I am hosting a free seminar Monday, Feb. 11, from 5 to 6 p.m. at the Santa Fe Main Library, 145 Washington Ave. To register, contact info@bettermoneydecisions.com or call 844-507-0961, ext. 700.

Kate Stalter is president, senior adviser and market strategist at independent, New Mexico-based asset-management firm Better Money Decisions.

For a no-obligation portfolio risk assessment, contact Kate at 844-507-0961, ext. 702, or kate@bettermoneydecisions.com.

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