Personal Finance | Michael R Lewis, ASJA

January 24, 2014January 3, 2024

5 Shrewd Ways to Adjust Your Portfolio As You Near Retirement

Life was good at the end of 2007 for Bill and Mary. Bill, at age 60, had enjoyed a successful career with Walgreens, one of the largest retail companies in America. His career, begun 28 years previously, enabled Mary to be a stay-at-home mom, paid for their two kids’ college education, and enabled the couple to build a $1 million position in a Fidelity New Millenium Fund through constant investments over the years. During the last decade, Bill had been the beneficiary of annual stock options which he faithfully exercised, maintaining the common stock with the faith that the company would continue to grow in value. By 2007, the stock was worth more than $300,000. The couple was looking forward to Bill’s early retirement in 2010 and a year of traveling, making up all of the trips they had foregone during the early years of savings and paying for college. Then disaster struck.

With the Great Recession, the S&P 500 fell more than 800 points, a 55% decrease. While the New Millennium Fund did better than the general market average, losing only 48% of its value, the value of Bill and Mary’s portfolio dropped to slightly more than $500,000. The Walgreens stock also suffered, falling from $48 per share in September to $23 in 2009, and the options that Bill had yet to exercise were underwater. Their plans for an early retirement were no longer possible.

6 Best Investments for Retirement Planning

Baby boomers are the first generation of a new retirement era with the burden of saving the bulk of their retirement income and making those savings last 20 to 30 years. This responsibility is due to the decline in company pensions which shifted saving and investment responsibilities to employees, as well as an increase in life expectancy after attaining adulthood (almost 20% since 1950). The challenge of investing has been particularly difficult in the last five years; a study by Thornburg Investment Management calculated the annual “real return” for many classes of investment during the period as being negative.

The possibility of a future investment environment where inflation remains low and interest rates rise (the opposite of the 1960s to 1980s) producing slower economic growth, projected healthcare expenses not covered by insurance, and the uncertainty of program changes in Social Security and Medicare will result in people continuing to work as long as possible, accelerating their savings in their later years, and seeking maximum returns in their portfolios.

According to Chris Brightman, head of investment management at Research Affiliates, “Baby Boomers are going to work longer than they originally expected. They’re going to have to save more than they planned. And they’re going to have to consume more modestly in retirement.”

Your Investment Options for Retirement

There are literally hundreds, if not thousands, of different investment vehicles available. The following list describes the most popular choices, while some investments (such as gold and collectibles) are not listed because, according to Warren Buffett, they are difficult to analyze, lack any productive use, and their future price depends solely on the hope that the next buyer will pay more for the item than the owner paid.

What are Bitcoins? Pros, Cons & Investment Opportunities

Historically, exchanges of value – barter systems – were done face-to-face so that participants could instantly verify the respective physical properties being exchanged. As purchasers and sellers became geographically distant, agents or trusted third-parties acting on behalf of the participants became necessary to verify the quantity or quality of the property being transferred. For example, credit card issuers are examples of a third-party standing in for a buyer, guaranteeing to the seller that the buyer’s funds are good.

The growth of the Internet and the proliferation of digital transactions have exposed many limitations to traditional currencies and exchange systems in the borderless, electronic world. Current limitations include high expenses, time delays, and security risks. These limitations are particularly egregious when the transactions involve parties on each side of the globe, different national currencies, and complex products.

The idea of an international currency – independent of a country or central bank and designed for a globalized economy – has fascinated economists, business executives, computer experts, and anti-government advocates for years. The ideal currency would provide anonymity to its holders, protection from inflation, and security from theft and fraud. These ideals led to the concept of a digital currency, enabling the concept of cash or cash equivalent to be used over the Internet.

Bitcoins (BTC), the latest and most popular outcome of efforts to create a practical digital currency, first appeared in 2009 with an initial issue of 2,625,000. As of December 7, 2013, there were 12,091,050 BTCs, each with a value of $736.61 USD.

The website Shopify recently listed 75 specialty retailers that accept bitcoins, and Forbes announced its “Top 10 Bitcoin Merchant Sites,” including website development software developer WordPress. Even Baidu, Inc., China’s biggest search engine, accepted bitcoins until the nation’s central bank banned the use or ownership of the currency by financial institutions.

Description of Bitcoins

According to Anthony Gallippi, CEO of Bitpay payment processor, “Bitcoin is a more secure, faster, and more affordable option for transferring funds.” In technical terms, bitcoins are a math-based, finite, verifiable, open-sourced, decentralized virtual currency that relies upon cryptography for security.
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December 18, 2013January 3, 2024

How to Choose the Best Stock Market Investment Strategy

According to a recent Pew Research report, more than one-half of people aged 30 or older have investments in the stock market and 80% of those making $75,000 per year or more have equity investments. These investments include individual stocks and bonds, as well as mutual funds and exchange-traded funds (ETFs).

While many suffered from the sharp decline in the market in 2008 – it lost 38% of its value – the S&P 500 closed above 1,800 on November 22, 2013, more than doubling its low of 721 on March 11, 2009. As investor confidence returns, many analysts predict that the market is going to continue its bullish behavior well into 2014 and beyond. Whether you select individual stocks or bonds or rely upon an investment manager to do it for you, it is important that you choose an investment approach fitting to your attitudes and goals.

Components of Investment Success

The optimistic outlook for stocks provides a great opportunity for existing and new investors to review strategies and adjust investment philosophies to optimize their future results. Financial experts agree that investment success is highly dependent upon the following activities.