Lessons to Bear

As a member of the baby boom generation (might I footnote very tail end of the generation :)) who hopes I am aging like a fine wine and not turning into vinegar, I wince at the idea of losing money again in a 2008-style meltdown. Although we are not technically in a recession or bear market, the market has been relatively flat in 2012.

If I’ve learned anything, I have learned from history and mistakes made along the way.

Four lessons I thought I would pass along…

Liquidity is golden

Savings should be a top priority. Any money you can tuck away in retirement, 529 and nonqualified investment accounts will be a welcome relief when times are tough.  If you can have the funds directly deducted from your paycheck, all of the better.

Healthcare uncertainty means more savings

The Medicare program is truly influx. We have seen proposals in Washington that range from privatizing the popular program to rising the eligibility age to 67. In nearly every scenario if the program is to remain solvent, it will have to cut benefits, raise taxes and demand higher out-of-pocket contributions from beneficiaries. According to the 2012 Medicare Trustees Report, the hospital insurance fund will be exhausted in a dozen years if nothing is done to reduce costs. Bottom line…we all need to save even more to cover healthcare costs in the future.


Rethinking the portfolio

Bear markets normally occur only about once every decade. This young century has seen two bubble-bursting downturns so far with an average decline in value of investments of about 40 percent. An allocation that is more balanced with fixed income and not as closely correlated to the S&P 500 large-stock index may be a good consideration.

Human capital best investment

Opportunities present themselves as the world spins faster and faster. The earth’s population has more than doubled in my lifetime, a rate of growth unprecedented in human history. All of those new souls will need food, water, places to live and the amenities of daily living. We’ll need new tools to meet the demands of population growth so that we are able to save our planet. That’s why it’s still a good time to buy global stocks and reduce debt on the personal and national levels.

A life planning goal…to get to the point that we don’t have to worry about investing at all and to spend more time with family. The only inevitable truth about history is that change is a river that never runs dry. We just to avoid getting tossed on the rocks while navigating the rapids.


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