Investing 101

 In October, when the stock market did a free for all, Jane Bryant Quinn did the practical thing  She panicked.  I think many of us can identify this past October with that feeling.  Traditional investment planning lulls us into a sense of security and creates an illusion of stability. But nothing happens every year exactly as planned.  We do know that life is uncertain, and that uncertainty for most people especially applies to managing their personal financial affairs. It seems that even during normal economic times, some investors find themselves overwhelmed with information and conflicting advice while others don’t have the time or interest to manage their personal assets and liabilities in a disciplined manner. We create the best investment plan we can with the knowledge we have, set it aside with the faith that we are investing enough money and pat ourselves on the back when those investments grow.  Then when the bears take over on Wall Street, we feel overly anxious because all of a sudden, our financial future is staring us in the face.  What was gently tucked into the recesses of our minds now colors every move we make. 

What we forget to take into consideration is that as the years go by, we will experience many change as our lives unfold– and it is absolutely normal for financial and market conditions to constantly be changing as well.  We just have to keep  this in perspective.  Instead of worrying about our losses, now is a good time to sit down with our financial planners and re-evaluate our plan for retirement, our children’s or grandchildren’s education, and other major financial goals in our life. Michael J. Oana suggests we ask ourselves: How much money is enough and what do we need to do to get there when we want to be there?  When calculating how much you might need to accumulate to generate the appropriate amount of cash flow for the future, you should consider a reasonable rate of compounded growth, as well as principal erosion through taxes and inflation. And managing your financial affairs also includes staying current with the impact of changing market conditions. Not many people have the knowledge or the time to do this on their own.  And what about drawing down your wealth once it’s accumulated? How much can you withdraw each month and not run out of money before your death? This will depend on, among other factors, your investment returns, the inflation rate, changes in your health or marital status, and whether you live beyond your life expectancy.

When you do a thoughtful inventory of important financial goals and assign priorities to them, today’s statistical modeling can provide a more accurate picture of a financial strategy than the straight-line models of the past. But it doesn’t guarantee results. Through periodic reviews of your goals and the performance of your investments, you can assess how your actual investing and spending patterns affect your probability of success. With this information, you can make changes as needed to keep your plan on track toward your own personal definition of financial success. There’s no substitute for common sense, a realistic overall plan that prepares for the uncertainties along the way, and sound financial advice from someone you can trust. 

According to eight financial gurus interviewed in an article in Fortune, we are in for some very scary times ahead. Instead of worrying, look at this current financial crisis as a wake up call to be more pro-active in developing your financial plan. Find ways to make you feel like you are the one in control.  One thing that has helped me put this crisis in perspective and make me feel like my retirement plans are on track is to buy more stocks, bonds and mutual funds. My financial planner told me that thanks to dollar-cost averaging, this is not a good time to reduce my payroll deductions into my 401K .   According to another  article in Fortune, even though past performance doesn’t predict future results, investing is still a good idea thanks to this dollar-cost averaging.  I am also investing a little extra in stocks that I have always wanted to have in my portfolio.  They have been consistent good performers, but were to pricey n the past.  Thanks to this downturn, they are on sale today, and what woman doesn’t feel good about shopping a sale.’; //leave this line

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