Today will be the second installment of a 3 article series, Right now while we are all startled like a deer in the headlights we should take a step back and ask ourselves: “Who am I and why am I investing in the stock market?”. There are basically 3 types of investors: 1) Those in their wealth accumulation stage, 2) Those in their wealth preservation stage and 3) Those in their wealth distribution phase. These stages usually parallel with what age you are.
In this article I will address those of you who are in the wealth preservation stage of your investment life cycle. You are probably between 45 and 65 years of age. Still working because you are dependent on that monthly paycheck to pay the bills. Your IRAs and 401K are beginning to have substantial balances but still not large enough to retire. Your house mortgage still has a balance, your kids are preparing for college and that big expense worries you. After all of these monthly obligation you still know you need to keep adding to that 401K or other retirement vehicles.
You are at the stage when the amount you are adding to your retirement fund is a much smaller percentage of the fund's balance so dollar cost averaging has less effect on your balance and the fluctuations of the market worry you.
Most of your 401Ks will have Stock, Growth and Tech, Real Estate and Bond options to choice from. Most are indexed to some financial benchmarks and you can use Barchart to set up a portfolio that reflects those investment choices so you can monitor them. Below I set up a chart showing a very simple portfolio that reflects some investment choices and the indicators that I can use to monitor them:
It shows the percentage of price change over that last 3 months:
Total Stock Market ETF (VTI) in Black
NASDAQ 100 ETF (QQQ) in Blue
Total Real Estate ETF (VNQ) in Gold
Total Bond Market ETF (BND) in Purple
Your chart may have many more options but it should show you which investment choice have had positive momentum in the last quarter so you can rebalance your portfolios.
My main advice is don't just blindly follow a predetermined asset allocation formula over the next 20 years and just file away your quarterly statements with out knowing what's going on.
Actively manage your retirement portfolio and make sure you are choosing options that are giving you a positive rate of return.
On the date of publication, Jim Van Meerten did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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