Now that the stock market has hit an all-time high crossing over 19,000 for the very first time, what should you be doing with your retirement savings? Is the market too high or is it going higher? Should you be getting into the stock market or getting out? How do you turn your retirement savings into a lifetime income stream that keeps pace with the rising cost of living without running out of money?
The first thing to remember about the stock market is that no one knows what will happen over short time periods – say less than five years out. Human emotions of greed and fear driven by geo-political events, natural disasters, good and bad economic and business decisions and other unseen and unknown influences can move markets in unexpected ways. It is best to maintain an all-weather approach with a balanced mix of stocks and non-stock investments. An allocation that you can live with during those volatile periods and still maintain your balanced investment mix. Jumping in and out of the market – or market timing – has proven to be the downfall of many. Better to ride through those temporary volatile markets and rebalance your portfolio as necessary.
The second thing to remember about the stock market is that over long time periods – say longer than five years – the stock market has proven to be a great hedge against the rising cost of living and an excellent income generator through the cash flow of dividends paid by the great companies of the world. When combined with a mix of non-stock investments such as bonds and cash, you can create a portfolio that can carry you through the most volatile times of recent history and still provide a growing income stream to fund your desired lifestyle.
My prediction of Dow 40,000 is not so unrealistic. It is only a matter of time. A history of the Dow Index is available at http://www.fedprimerate.com/dow-jones-industrial-average-history-djia.htm. A review of that site shows a historical progression of the index from the year 1900 through today. In the year 1900 the index was less than 100. Only 30 years ago the index was at 1900. Today we are over 19,000. It doesn’t take much to imagine the index at 40,000 at some point.
Let us know if we can help you to take advantage of the benefits a properly allocated retirement portfolio can provide.