Make us your home page
Instagram

Chin up, savers, it'll get better

Times staff and wires

If the Busch Gardens people could capture the roller-coaster swings investors absorbed in the first half of 2008, they'd have one heck of a theme park ride on their hands. Which brings us to you — the reader — trying to hold on to your own little nest egg of stocks, bonds and mutual funds. Between the bratwurst and fireworks of July 4, consider five things you can do to help yourself financially at the start of the second half of '08.

1 The arrival of the bear market — with the Dow off 20 percent off its peak last fall — drives home the importance of asset allocation. If you had all your money in a broad U.S. stock market index fund, you lost about 16 percent between the Dow's record high on Oct. 9 and June 30. But investors who split their money between stocks and bonds in a basic 60/40 mix lost roughly half that amount, because the U.S. bond market gained 4 percent over the period.

2 Just as important as having the right asset allocation is making sure you invest enough. Many big-spending boomers are shocked to learn how little of a portfolio financial advisers say they safely can withdraw in the initial years of retirement to avoid running out of money in old age. Many advisers cite computer modeling showing that retirees under the age of 70 risk depleting their nest eggs if they cash out more than 4 percent annually. That's just $40,000 a year based on a $1-million portfolio.

3 Don't look for an economic miracle in the second half of this year. Yes, there may be pockets of real estate hope in some Tampa Bay neighborhoods, but the overall trend is down. We have not hit bottom yet. While experts do not expect the Federal Reserve to lower interest rates when the central bank meets in August, they do expect longer-term interest rates to rise to offset the threat of inflation.

4 Make an investment plan. This will help you avoid panicky or impulsive moves. Online 401(k) accounts make it almost too easy for investors to transfer money from one fund to another. "When everything's headed down, shifting into cash can have the immediately gratifying effect of shielding your portfolio from losses," says Christine Benz, Morningstar's personal-finance expert. But the sense of relief, she adds, is often short-lived, "replaced by another nagging worry: Is it time to get back in?"

5 Be patient. Be vigilant. The average bear market lasts 406 days, during which stocks fall 31 percent on average. Using that benchmark, we're only halfway through the pain. And keep this sobering thought in mind: Adjusted for inflation and dividends, the return on the S&P 500 was negative for the decade that ended on June 30. And from 2000-2007, the S&P 500 has returned just 1.66 percent. Throw in inflation and taxes, and you've been losing ground.

Information from the Wall Street Journal, Business Week and Smart Money was used in this report.

Chin up, savers, it'll get better 07/03/08 [Last modified: Monday, November 1, 2010 2:22pm]
Photo reprints | Article reprints

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Federal agencies demand records from SeaWorld theme park

    Tourism

    ORLANDO — Two federal agencies are reportedly demanding financial records from SeaWorld.

    Killer whales Ikaika and Corky participate in behaviors commonly done in the wild during SeaWorld's Killer Whale educational presentation in this photo from Jan. 9. SeaWorld has been subpoenaed by two federal agencies for comments that executives and the company made in August 2014 about the impact from the "Blackfish" documentary. 
[Nelvin C. Cepeda/San Diego Union-Tribune/TNS]
  2. Legalized medical marijuana signed into law by Rick Scott

    State Roundup

    TALLAHASSEE — Gov. Rick Scott on Friday signed into law a broader medical marijuana system for the state, following through on a promise he made earlier this month.

    Gov. Rick Scott signed legislation on Friday that legalizes medical marijuana in Florida.
  3. Line of moms welcome Once Upon A Child to Carrollwood

    Business

    CARROLLWOOD — Strollers of all shapes and sizes are lined up in front of the store, and inside, there are racks of children's clothing in every color of the rainbow.

    At Once Upon A Child, you often as many baby strollers outside as you find baby furniture and accessories. It recently opened this location in Carrollwood. Photo by Danielle Hauser
  4. Pastries N Chaat brings North India cuisine to North Tampa

    Business

    TAMPA — Pastries N Chaat, a new restaurant offering Indian street food, opened this week near the University of South Florida.

    The menu at Pastries N Chaat includes a large variety of Biriyani, an entree owners say is beloved by millions. Photo courtesy of Pastries N Chaat.
  5. 'Garbage juice' seen as threat to drinking water in Florida Panhandle county

    Water

    To Waste Management, the nation's largest handler of garbage, the liquid that winds up at the bottom of a landfill is called "leachate," and it can safely be disposed of in a well that's 4,200 feet deep.

    Three samples that were displayed by Jackson County NAACP President Ronstance Pittman at a public meeting on Waste Management's deep well injection proposal. The sample on the left is full of leachate from the Jackson County landfill, the stuff that would be injected into the well. The sample on the right shows leachate after it's been treated at a wastewater treatment plant. The one in the middle is tap water.