Retirement planning is about understanding your retirement goals and the retirement strategies needed to get you there. Conventional retirement wisdom suggests that individuals should hold a well-diversified portfolio of stocks, bonds, and cash that grows proportionally as one ages.
The old adage for allocating funds between stocks and bonds holds that you should keep a percentage of stocks equal to 100 minus your age. If you are 35, a conventional financial planner would tell you to put 65% in stocks and 35% in bonds. If you are 60, they would tell you to put 40% in stocks and 60% in bonds. Or looked at another way, the allocated bond percentage is equal to your age…the remainder is in stocks.
Younger investors have the luxury of time on their side and can afford to have a larger percentage of their investments in high-risk/high-yield equities. The older you get, the better it is to have an increasingly large percentage of your retirement income in low-risk/low-yield investments.
That said, high-yield investments are not for everyone. Keep in mind, when you are looking for high-yield investments, such as penny stocks, your risk will be much more significant than with conservative investments, such as government bonds. But then again, a basic rule of investing is that high risk translates into high reward.
Where can investors looking to build their retirement nest egg turn to increase their income and decrease risk?
Whether you’re high risk or risk-averse, one of the most common investment strategies is to focus on income-generating investments. This is easy to manage, as investors spend only the income (dividend yields, interest) that a portfolio generates.
If you want to generate additional income from your investment strategies, you may want to streamline your portfolio and increase the bond allocation to higher yield bonds, or change your stocks to higher-dividend equities.
Regardless of age and where you’re at with your retirement savings, there are investment strategies to suite your risk level and long-term needs. Some investors prefer to maximize expected returns by investing in risky assets, others prefer to minimize risk, but most look for a strategy somewhere in between.
That’s why it’s important to look for investment strategies that allow you to take advantage of long-term growth on the stock market; while hedging against downturns with high-yield bonds and equity funds.
Last week was not a great week for chart watchers. The DOW lost 223 points on Monday and Tuesday and was down another 225 points to below 17,000 on Thursday morning. What concerns me is that this is the sixth time the DOW has failed to hold above 17,000, which is a red flag that suggests vulnerability is on the horizon. There clearly appears to be a multiple top formation in place that could be difficult to break in the short-term, based on my technical analysis. The small-cap Russell 2000 is also in trouble after the emergence of a bearish death cross on the chart last week when the 50-day moving average (MA) fell below the 200-day MA. Small-cap sto ... Read More
While it’s well known that technology has led the broader stock market higher, there is a safer and more conservative play for investors at this time, according to my stock analysis. Where? Investors may want to take a glance at the banking sector. Banks have dug themselves out of the financial crater that was imposed on the group by the sub-prime debt crisis back in 2007, which sent the global economy and banks into a massive tailspin, as is well represented in my stock analysis. But that was then. As my stock analysis indicates, the banking sector has been rallying over the p ... Read More
Don’t let the new records by the Dow Jones Industrial Average and S&P 500 trick you into thinking everything is fine in the stock market. Just take a look... We have the rising military actions against ISIS in Syria and Iraq that involve five Arab countries, which could really increase the geopolitical risk worldwide. China is continuing to deliver muted economic results and suggested there would be no additional monetary stimulus at this time. Meanwhile, the slowing in the eurozone and Europe, given the economic sanctions on Russia, will impact the demand for Chinese-made goods. And while the domestic economy is holding, th ... Read More
Gasoline prices are finally headed lower at the pumps, but it’s happening slowly. It always seems prices at the pumps rise much faster when oil prices increase, but they move much slower when oil prices decline. I guess that’s big oil for you. The average price of regular gas across the nation is around $3.55 a gallon. That’s down from the more than $4.00 a gallon we witnessed in July 2008 and again in May 2011. Lower gas prices translate into more money in your wallet to spend on other goods and services. This is good for the country’s economic growth. As a consumer, while we are experiencing lower gas prices at this ... Read More
I’m not sure how many of my Daily Gains Letter readers realize that Chinese stocks, as reflected by the Shanghai Composite Index (SCI), have outperformed the S&P 500 so far this year. After offering up underwhelming performances since 2009, the SCI has rallied 9.98% this year, compared to 8.44% for the S&P 500 and 3.23% for the Dow Jones Industrial Average as of Monday. We’re not talking about resurgence in Chinese stocks and a return to the glory days more than five years ago; instead, I’m simply saying there’s finally some buying in an oversold Chinese stock market. Read More
The S&P 500 recently traded at a record-high, just before tensions in the Ukraine erupted and the global stock market declined as fear of an escalation and war intensified. While the charts continue to show the stock market wanting to move higher after excellent gains in February, I still sense the upside moves will be more difficult to come by compared to what we saw in 2013. Even at this point, the Dow Jones Industrial Average and the S&P 500 are still negative this year. If the stand-off between the Ukraine and Russia doesn’t escalate, I would expect the stock mar ... Read More
Last Wednesday, I had fun watching the World Cup game between Argentina and the Netherlands. As strange as it may sound, I actually found that the tension and apprehension throughout the match reminded me of the stock market. Despite the Dow Jones Industrial Average recently trading above 17,000 and the S&P 500 at another record-high, I still sense the stock market is vulnerable to selling. I think this will be especially true if the second-quarter earnings season pans out as expected, devoid of any major growth in earnings or revenues. Alcoa Inc. (NYSE/AA) offered up a nice report, ... Read More
One of the most common traits I find in successful companies is that they often have a multinational presence. That’s not to say that domestic-only companies are not successful, but for real growth, many of the top S&P 500 companies are global, based on my stock analysis. Whether it’s in the industrial, technology, financial, aerospace, or healthcare sectors, the commonality is the global exposure that many of the world’s top companies all exhibit. In fact, the failure to capitalize on foreign markets can really limit a company’s growth, according to my stock analysis. There are on ... Read More
You can’t deny it: there are outright signs of stress on the key stock indices. We see investors are worried, and they just don’t like risk. We see huge selling in the growth stocks, with names like Amazon.com, Inc. (NASDAQ/AMZN) and Twitter, Inc. (NYSE/TWTR); they are witnessing a huge sell-off and are now in bear market territory. The biotechnology sector is getting slammed—investors are hitting the bid and running for the exit. With all this happening, one question comes to mind: what happens next? Growth stocks can act as a leading indicator of what’s next for the markets. Are key stock indice ... Read More
One of the investment strategies discussed in the mainstream these days is to add exchange-traded funds (ETFs) to your portfolio. It is said that when you do just that, your portfolio has lower risks and you are well diversified. For investors who are not as advanced, when it comes to investing; this investment strategy makes sense. For those who are advanced, they shouldn’t fall for this investment strategy; they may be better off going the other way—buying individual stocks instead. Let me explain… Between March of 2009—when the bull market run started—until February ... Read More
Well, that didn’t take long! Just a few weeks ago, I wrote an article stating that investors should begin to worry about the lofty level of the stock market. Since that time, the S&P 500 has dropped by more than five percent in less than two weeks. This market correction won’t be a surprise to my readers, as I have been suggesting investment strategies that can help prepare your portfolio for a large downswing in the market for some time now. When I wrote the article in late January, the S&P 500 was surging, even though the preliminary Thomson Reuters/University of Michigan index of consumer sentiment dropped month-over-mo ... Read More
Though making money is important, that’s not the be-all and end-all behind smart investment strategies. Just think about the common phrase “a dollar saved is a dollar earned.” Success in trading and investing means you need to be aware of both the upside and downside risks, such as we are seeing now as the stock market moves lower. In general, investors should hold off on buying for now until we see some solid opportunities. Trading volume is rising on the down days, which confirms the selling pressure. As well, the Dow Jones Industrial Average has declined for five straight sessions, losing nearly four percent in that time. A look at the chart of the Read More
There’s always something investors are worried about. Recently, we heard about the U.S. government reaching the debt limit, shutting down, and inching close to defaulting on its debt. Investors reacted, and the key stock indices started to slide lower due to concern over what could happen. Now, with a deal being struck to extend the debt ceiling and budget deadlines, those worries are over, meaning U.S. creditors will get their interest payments and the government will go on operating as usual. Thi ... Read More
Over the Labor Day weekend, I met up with my old friend, Mr. Speculator. As always, we had a debate about portfolio management. We had a long conversation about what really is the right way to manage your investments—and, for that matter, if there is any. Should investors invest 40% of their portfolio in bonds and 60% in stocks? Should it be the opposite? Or is there another possible combination? He said, “Moe, I am a firm believer in going for the fences every time for now, but do you really think I will continue to have the same approach in the long run?” (Turns out, there’s actually a ratio ... Read More
Not too long ago, the per-barrel price of oil was hovering close to $85.00. Now, a few months later, it trades above $107.00; this is an increase of roughly 25% in a fairly short period of time. One may ask why this matters, and what it means for the overall U.S. economy. At the most basic level, the price of oil has a very deep impact on consumer spending, which makes up 70% of the gross domestic product (GDP) of the U.S. economy. It impacts consumers in ... Read More