The 4 Percent Rule and the Protection Game

You may have heard of the 4 percent rule: If you have a diversified portfolio, you should be able to withdraw 4 percent each year during retirement, and still have enough money to last you the rest of your life.

That rule/percentage is generally accepted by the investment community, or at least it was. After Y2K, people began to say it should now be the 2 percent rule, which in essence means you have to have twice as much money.

The Best January Since 1987, But…

The market had an awesome month last month. The S&P and the Dow were partying like it was 1999—or rather, 1987, which was the last time the market hit such highs in January. And 1987 was quite a year. After that spectacular January, the market had a few ups and downs, but the S&P essentially stayed flat until the end of May. Then the Dow plunged in October, and on October 19th, 1987, the Dow fell a record 22 percent in one day.

An Unlimited Upside and a Tolerable Downside

Money Matters’ buy, hold, and sell strategy is designed to enable us to participate in the stock market as long it is going up. We see that as an unlimited upside. The strategy also tells us when the market is trending downward so we can get out hopefully before any major damage is done. It can sometimes predict a bear market that doesn’t happen and there could be a small loss or tax consequences. That’s a tolerable downside,

Why We Operate in Protection Mode (And Why I Think You Should, Too)

I recently received an email from a listener who told me he wants to beat the S&P 500 index.  If you are retired or close to retirement, I don’t think that’s wise. At that stage, I think you should not be looking to grow your investments. I believe you should be in protection mode, where your main goal regarding your investments is the preservation of your standard of living.

At Money Matters, we advise our clients to take only as much risk as is necessary to accomplish their financial goals.

Protect Your Principal During Bear Markets

If you are retired or retiring soon, you probably have different financial needs than you did when you were younger, and will soon need to replace your wages. If you’re counting on your investments to do that for you, I believe your number one job is to protect your principal. After all, if you lose half your money in the next bear market, you probably won’t be able to live the retirement lifestyle you want.

WHAT’S ON YOUR MIND?

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That’s the way it should be among friends.


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