A Bear Market Has Begun?by moneyre5

Bear Markets

My comments below and the articles that follow them, are in answer to lots of questions people are having – almost continuously. The first is from Casey Research, the second is an insightful article from Sovereign Man re prostitutes and Bankers, and the third is “STOCKS OFF THE CLIFF” but the article was printed in Nov 2012! No matter what product of ours that one is using to achieve a certain objective, all of this will help you develop your own perspective which will be the basis for what you or your friends might want to do. Any questions?

We see a lot of these articles (many from Casey) – with lots of great justifications. They have been repeated in some format over and over for the last few years. Sooner or later they will be right, there will be a strong correction in the market – maybe not for the reasons they state, but a correction nevertheless and every single one of them will say in the future “see, we were the ones who told you so” and sell lots of subscriptions to their newsletters. Although all the points in this article are logical and reasoned, the market and everything about it just does not “kowtow” to the predictions of the thousands of prognosticators.

That being said however, one must always be braced for a major correction that could suddenly happen. For those who do monthly investment programs in a broadly diversified portfolios and have say 10 years before they will need the money should consider investing right through the correction because you will be buying discounted shares that will leverage your return during the recovery. For example, say the market is at 10 today, disaster strikes, it goes to 5, and by the end of 10 years it finally gets back to 10. For the investor who got out of the market the day before it crashed and got back in when it got back to 10, 10 years later his value is still 10. For the investor who invested throughout the crash and recovery – using the hypothetical assumption that the crash and the recovery was proportional – he will have more money in his account that if the market actually (proportionally) doubled during the 10 year period.

For the investor who does not invest monthly in a broadly diversified portfolio, or has less than a 10 year window before retirement, they need a safe harbor to go to or they could suffer a large loss; have to work much longer; or in some cases, never be able to retire. Almost all (Gov’t qualified) retirement plans do not offer a safe harbor – they might offer a bond portfolio, maybe even a money market portfolio, but rarely offer a guaranteed account. A guaranteed income account is a safe place to park when everything is going to hell in a hand basket!

There are 2 things all prospective retirees need in their retirement accounts – one is a guarantee that the income will last their lifetime and the other is that they can avoid market volatility during retirement so their income doesn’t expire before they do! That is what real planning is all about. But how many people can actually say they have made these preparations? If they have not, they could be in for some tough “golden years.”

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