2012 - A Solemn Year For Retired Investors? ’Don’t Think So

by Jeffrey-Voudrie

Investing Successfully Outside Of Wall Street - The Retired Investor's Guide

As the close of the first quarter for 2012 approaches, investors around the country are wondering whether the financial picture on their investments would reflect the shaky notes of 2011. And this, with good reason as proper financial planning has never been as important as it is now in the US. I therefore wanted to take a few minutes for a quick review of the investment climate of 2011, to talk about what I see happening in the markets in 2012 and how I anticipate positioning the portfolios. With an increasing number of retired investors voicing their frustration and discouragement with the low interest rates and highly volatile markets, I however remain optimistic about what lies ahead and confident about the strategies we can use to successfully navigate our way forward.

2011 was a year of incredible volatility. Hedge fund managers are supposed to be some of the best in the business, and yet, I’ve seen reports that roughly 95% of hedge fund managers lost money last year. 95%! Many of the larger stock mutual funds also saw losses. All we need to do in order to understand why, is to look at this one year chart of the S&P 500. It was a year of incredible volatility and, to many, brought back memories of the crash we had in 2008.

Graph

Buy & Hold Investments Losing Its Appeal To Retired Wealth Investors?

As you can see in the chart above, the S&P 500 ended within 1 point of where it began. We saw the market gyrate back and forth in a 7.5% range between January and July.  7.5% up and down is not normal volatility, but then things got worse at the end of July. The S&P 500 plunged about 20% and then continued to gyrate up and down in a 15% range.  

You can also see that it was a sideways market. Because of that high volatility and the lack of trend, I generally kept the accounts conservatively invested. There was a large amount in bond-oriented or bond-like investments and in cash/money market. There were times throughout the year when the market appeared to start to trend and as a result, I began moving money into stocks only to quickly exit those positions when it became obvious it wasn’t a trend.

The result of that conservative positioning is that the volatility of my client’s accounts was very low relative to that of the market and so they generally did not experience prolonged plunges or wild movements up and down. That’s considerably different from what buy and hold investors experienced. In fact, just like in 2008, many buy and hold investors reached their pain threshold and quit investing in the markets altogether.  Many of those buy and hold investors aren’t going to be able to reach their long-term goals because they’ve had such bad experiences.

How then can investors make sure to avoid such terrible experiences?

To find out more, view my video on the topic (below) and look out for my next article, The Livability Factor – or simply put, the life sustaining factor to investing in volatile markets, such as the ones we are now experiencing. I will be introducing a new dimension to investing in turbulant markets that can provide investors greater comfort as they wait for their investment returns. Be sure also to check out my next article on the subject titled:The Livability Factor – A Healthier Alternative For The Retired Wealth Investor.

Jeffrey Voudrie Shares Some Tips On Retirement Investment

About The Author

Jeff Voudrie is a Certified Financial Planner and nationally recognized financial advisor. Jeff has been in the financial industry for twenty-five years, and has been interviewed by The Wall Street Journal, CBS Marketwatch, Kiplinger's, The London Financial Times, The Christian Science Monitor, CFO.com and Financial Planning Magazine. For more information on Jeff, please visit: www.jeffvoudrie.com or www.commonsenseadvisors.com

Updated: 03/30/2012, Jeffrey-Voudrie
 
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