
The Myth of "Safe" Money
I would like to argue against the perception that bonds are "safer" than stocks, especially when considering long-term financial goals like retirement which can last 20-30 plus years.
I would like to argue against the perception that bonds are "safer" than stocks, especially when considering long-term financial goals like retirement which can last 20-30 plus years.
Successful investing for retirement and in retirement is not that complicated. The planning process can be complicated, such as when to liquidate certain investments, how much cash to keep on hand, and sticking to your plan, but the investing process isn’t hard at all.
Everyday cooperative employees retire. Some of these retirees take the lump sum option and "rollover" that money to an Individual Retirement Account (IRA) or they "rollover" that money into their NRECA 401k. They may be working with a financial advisor or they may have decided that they don't want to pay an advisor and they want to do it themselves. This blog is speaking to the do it yourselfers.
Well according to my television and the financial "news" media the economy was on the verge of collapse this past April. The financial "news" media seemed excited about that and also excited to mention that gold had broken through to new all-time highs! And while that is sort of true because gold recorded a new nominal high price, that's not the whole truth. Nominal in this context means unadjusted as it pertains to inflation which, in the end, is all that really matters. They tend to leave the adjusted for inflation part out because it's not as sexy and doesn't excite people as much.
Today I want to discuss, what I feel, is the single most important benefit the co-op offers you. And that is your NRECA 401k plan. It’s important because it’s the fastest and simplest way for you to grow your wealth over time.
Companies and what's referred to as the "stock market" are two different things. Companies are rational. The "stock market" is irrational. When you begin to realize that we are long-term goal-focused investors and we are owners of successful companies rather than just investors in the "stock market" you can change how you perceive the panic that the financial "news" media assaults us with on a 24/7 basis.
The impulse to get out of the market before something bad happens is an impulse in all of us but it's at best only half of a strategy. What impulse would you listen to for re-entry to the market? Impulses don't make a strategy, but they can totally destroy a strategy.
It depends on your goals, your long term financial plan, your age even factors into things here. Let's just run through these options real quick.
Today I want to discuss why you should actually embrace temporary market declines rather than fear them. I said temporary because they all are temporary and always have been temporary and will always be temporary.
It seems there are many people who can't distinguish between risk and volatility. Volatility isn't risk. They aren't the same thing at all.
If you follow financial "journalism" at all you will inevitably hear how volatile the market is and how you should take action to protect yourself from the volatility. However, when we turn off the "news" and look at things rationally, we can see a completely different story. One that is actually true. It's not the market that is volatile. It's the investors that are volatile.
The picture associated with this blog shows what the average investor not working with an advisor often does.
Retirement has two doors. One leads to a chance of success. One leads to certain failure. Which door will you choose?
In a society that has basically turned outperformance into a religion, the average investor is not only underperforming the markets, he is consistently underperforming his own investments!
If you spend ten minutes this year reading economic forecasts, you've wasted ten minutes of your time that you'll never get back. By the way, time is your most valuable asset. Invest it wisely.
The three most common business structures that use the terms are Insurance Companies, Broker Dealers and Registered Investment Advisers. All three are very different in how they run their business and each will specialize in different areas.