Thoughts, ideas, suggestions and education from financial adviser Jim Ludwick, Founder of MainStreet Financial Planning, Inc. of Odenton, MD; Washington, DC; New York City, and Santa Barbara, CA

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Friday, August 1, 2014

Doom on the Horizon

The correction is coming, the correction is coming.  Do I sound like Paul Revere announcing the British?  Well, yes, that’s my intention.

Now I could have written this piece six months or even two years ago.  I would be saying the same thing:
           
o   Stay diversified

o   Have enough cash on hand to wait out 2 to 3 years of a down market

o   Buy low, or lower as the markets go down if you have extra cash

o   Don’t pay too much attention to day-to-day movements

o   Look to rebalance two to four times a year.  The calendar is not sacred, but percentages should be.

I have often remembered and repeated Warren Buffet’s advice: “Be fearful when others are greedy; and be greedy when others are fearful.”  The last big downturn 2008-to early 2009 gave me the opportunity to put this strategy into action.  My partner Anna will attest, I was buying on really bad days.   It served me well.

Last year I cut back my asset allocation from 90/10 stocks to bonds to a more realistic 60/40 given I have five years or a little bit less until I plan to start spending some of that money after long years of saving and investing.  I also have about two years of cash on hand for down market investing or spending without touching investment monies.

It’s all drama.  That’s my summary of day-to-day financial news.  The bolder or more dramatic the headline, or the scrolling BREAKING NEWS tag running across the screen, the more I want to turn off the TV, computer, or fold up the newspaper and magazine and throw them away.  Six months later it usually was no big deal.

So why this post?  I want my family, friends, clients, prospects and other allied advisors to be prepared.  You’re the reason I’m doing this. 

o   Don’t get caught up in the day-to-day dramatic news

o   Get out that checklist on an annual basis to cover all your bases (If you don’t know what they are, or don’t have a checklist, email me)

o   Reaffirm your life priorities, not just your financial goals

o   Enjoy the rest of summer.  It’s looking good.



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