“Market Recover: Have I Missed the Boat?”
Sunday, February 14, 2010 at 2:46AM Vince Covino
Wealth Management Advisor
Vince Covino is a Wealth Management Advisor specializing in wealth protection and accumulation for chiropractors. He currently works with over 200 doctors in 37 states.
Are you participating in, or even outperforming the markets in this steep financial recovery? The primary reasons that the average investor underperforms the market are: a. Lack of a clearly defined strategy, b. having an undisciplined approach to investing, c. allowing emotions to drive decisions, and d. being overconfident and having unrealistic expectations for performance.
In my April article, “Can The Economy Recover”, I wrote, “While it certainly sounds counter intuitive, I believe many millionaires will be made out of this recession. It will likely be those who are paying close attention to the unprecedented opportunities this emotionally based market anomaly has created. Unfortunately, most investors will continue to make critical investment decisions with their gut feeling…When you look back in five or ten years, are you going to say this is one opportunity that didn’t get away from you? This is a time to recognize that great value comes in time of great uncertainty.”
If you didn’t have a large portion of your portfolio in the financial markets over the last five months, you are probably feeling like you “missed the boat”. The reality is that the stock and bond markets have historically gone up more often than they have gone down.
Many doctors fled to safe or guaranteed products at the worst time possible, and will likely continue to miss the boat. With government deficits and spending at record levels, now maybe the time to hedge against inflation risk. If you still have several years before you retire, you should consider the risk of not investing in assets with growth potential to protect your purchasing power. For instance, if you want to pay for your children’s college education, are you aware that from 1984-2008 the cost of college tuition and fees are up 459%? (1) Is your portfolio poised to keep pace with these inflationary pressures over the long term? If you want a great lesson on inflation, ask your parents what they paid for their first home, then ask them what they paid for their most recent car purchase. You will likely you’re their recent car purchase was more than their first home!
From 1989-2008, the average equity investor averaged a dismal 1.8% return while the market averaged 8.4% in the same period (2). Why the depressing disparity? Certainly making emotional decisions and not paying close attention to your financial roadmap to success is the culprit in most cases.
Talk to your financial advisor today to make sure you are strategically positioned for an economic recovery.
Note: The strategies discussed involve risk, including the potential for principal loss. This should not be considered individual investment advice; you should consider your investment objectives and risk tolerances before making any financial decisions.
(1) Source: U.S. Department of Labor Bureau of Labor Statistics
(2) Source: DALBAR, Inc. Quantitative Analysis of Investor Behavior, 2008
The S&P 500 Index is an unmanaged group of stocks and considered to be representative of the U.S. stock market in general. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Securities & Advisory Services Offered through VSR Financial Services, Inc. A Registered Investment Adviser and Member FINRA/ SIPC Financial Alliance for Chiropractors is independent of VSR