Tag Archives: retirement

The Next Stock Market Collapse: Are we There Yet?

April 3, 2016

It seems that we are entering a decisive period for the stock market. The S&P 500 is right at the top of a channel between 2,100 and 1,920. Although I don’t like technical analysis, it is pretty clear that if it rises significantly about 2,100, then a new bull market will start. Conversely, if it drops below 1,920 a major market crash may follow.

S&P 500 10 Year Chart

S&P 500 10 Year Chart

Although anyone with limited knowledge of technical analysis would come to the same conclusion, I imagine 100,000,000 would-be retirees don’t look at this chart. And even if they did, they would not be able to see its importance.

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Markets go Up and Markets go Down

Although this may seem incredibly obvious, many people say that markets always go up. I remember during the real estate bubble that popped in 2008, agents were saying,

Real estate always goes up.

It’s pretty obvious now that is a lie. But it works for them. The clueless would-be investors that believed them bought up properties like there is no tomorrow. And for them, there wasn’t much of a tomorrow. Most of the properties went into foreclosure and were repurchased by more savvy investors.

Shanghai Composite Index

Shanghai Composite Index 2011 – 2016

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Are you Ready for the Financial Crisis?

A wise man once wrote:

Markets top slowly and bottom quickly.

When I read this and anlyzed some of the major market tops over the last 100 years, I was surprised by the accuracy of this statement. (One major exception was the 2000 Tech Bubble, which was quite different from other market dynamics.)

S&P 500 Jan 2011 - 2016

S&P 500 Jan 2011 – 2016

The theory behind this is that the “smart money” figures out that a market is topping long before the average Joe. I’m not sure if I agree with the theory, but it does seem to me that the “stupid money” gets out way too late, after the market has dropped significantly.

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Stocks And Retirement | Should I Keep Holding On To These Stocks?

All retirees end up asking themselves if they should cash in their chips and make a smooth, profitable exit from the stocks game. Having nurtured their portfolios through the years, they sometimes feel uneasy about selling their stock assets. After all, a lot of time has gone by, watching them, believing in them, having them generating income, even if poor at times. Many retirees know that they could generate some extra cushion by unloading their stocks, but they just can’t seem to fathom the act.

Image courtesy

Image courtesy Andreas Poike

It’s important to remember why you started accumulating stocks in the first place. In most cases, it was simply a matter of developing a tangible financial portfolio; something that you created to make life better for the future of you and your loved ones. Well, have your stocks done that? Maybe you took a heavy hit back in 2008. Maybe you’re just recovering – and stock markets are doing just about as good as you could hope for right now. Maybe it is time time to cash them in. You can try the superannuation calculator over at Suncorp, if you need a hand figuring out how much you need to retire.

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The Singularity is Near. How About Your Retirement?

My interest in artificial intelligence and its potential applications in investing and personal finance led me to people like Ray Kurzweil and the notion of a Technological Singularity.

Image courtesy Steve Fareham

At its most basic level, the definition of the Singularity is the point when machine intelligence reaches — and then quickly surpasses — human level intelligence. The Singularity also promises, at the least, to bring longevity (if not immortality), radical abundance, space travel, and more.

One of the research questions we’ve looked at is how can AI help individual investors.

Michael Nuschke, who blogs at Retirement Singularity, has been exploring a similar question on how the pending Singularity will change our retirement planning. Certainly, things like longevity and new production technology (like 3D printing technologies) will change both our careers and our retirement planning.

I brought Michael in for a conversation about the Singularity and retirement.

How is technological change affecting retirement investing and financial planning?

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Weekend Wisdom: The Cure for the Uncertainty Blues

nicubunu--creative commons

There was some good economic news this week. There was some bad economic news this week.

Some people say we’re in for another economic disaster; others say the recovery is just starting.

And that means there are a still a lot of unknowns out there.

And there are — and, guess what?–there always will be a lot of unknowns out there.

The best you can do in uncertain times is stay informed and stay disciplined. There has never been a time in human history when the connection to knowledge has been this easy.

Here are a few links to get you started

Financial Samurai — Taking Money For Granted: What To Do If The Money Runs Out?

See Debt Run — How to Find $500 by Raiding Your Collections

Street Smart Finance — Why I Blog and Why You Should Too

Invest It Wisely — I Don’t Worry About Retirement Now, Do I?

My Journey to Millions — How Families Are Dealing With the Recession

Howard Lindzon — How to Invest for Profits and Joy

Pick the Brain — Post-traumatic Growth: What Research Says About Why Some Grow While Others Break In The Face of Adversity

The College Investor — Do You Know Henry?

Untemplater — How to Cope With The Agony of Waiting

One Cent at a Time — Tips to Avoid Online Auction Scams


The Ivy Portfolio Review: Part 1

Last week I read The Ivy Portfolio by Faber and Richardson. Before I tell you about it, let me share with you one incredible resource.

I found out about the book from an awesome site that you really need to check out: dshort.com. I was so impressed that I immediately added it to the blogroll. What’s so great about it? It is easy to understand, offers outstanding content, and has great charts and graphs. I’ll be writing about it extensively in a future post.

Back to The Ivy Portfolio. It explains how Yale and Harvard endowment funds have outperformed the market and had consistent returns for 23 years (ending in 2008). I think that is pretty useful information. And, thanks to the great writing, you don’t need a Ph.D. in mathematics to understand it. It is actually very easy to understand and replicate the strategies.

How good is outperform? Yale returned an average of 16.6% per year. Harvard did 15.2%. Not bad for such a long period and two major market crashes. What is their secret? Did they have 100 Ph.D.’s working for them?

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All Stock Price Drops Help You, All Stock Price Gains Hurt You

Rob Bennett developed the first retirement calculator that contains an adjustment for the valuation level that applies on the day the retirement begins. His bio is here.

You are 35 years old. You know that you need to start saving for retirement if you hope to be in good shape by the time you turn 65. Fortunately, you just received a $10,000 raise. You make a decision to invest this entire amount in a broad index fund every year for the next 30 years.

S&P 500 over the Last 30 Years

A year passes and you take a look at your portfolio statement to see where you stand. Yuck! Bad news! Stock prices have fallen 30 percent. Isn’t it just your luck to begin investing in stocks just before a significant price crash?

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Social Security – I’ve Fallen and I can’t Get Up!

As you probably already know, the government announced that there will be no increase in Social Security next year. Here’s a post over at Yahoo Finance about the details. I think it is important because it is a clue about the big problems awaiting people who are dependent on Social Security. That’s why they call is Social Insecurity.

Currently, 2/3 of retirees depend on Social Security for the majority of their income. And, for 1/3 it is their only source of income. Right now Social Security has enough money to pay. But what is going to happen in 5 or 10 years when there is no more money? Who is going to pay?

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Increasing Retirement Income through Restarting Social Security

Probably the greatest problem that the elderly will face is dwindling income. The government reduces social security income in an indirect way: they underreport the level of inflation. This allows the government to pay less in social security benefits. And, it constitutes theft from the very people who the system was designed to help. Social Security may have been designed to help people, but someone needs to keep an eye on the people who are running the system.

Another force that is causing retirement income to fall is the falling dollar. It has lost 40% of its value in the last 8 years. That means that imported items that everyone consumes are more expensive. Furthermore, there is no sign that the dollar will stop falling in value. It could lose another 40% or more.

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