Women, Wisdom & Wealth: Life’s, and investing’s, ups and downs

DARCIE GUERIN

“Time is a versatile performer. It flies, marches on, heals all wounds, runs out and will tell.

Franklin Jones, 1887-1929

There’s never a dull day in the financial markets. On Thursday, May 6 our office was singing Tom Petty & The Heart Breakers 1989 hit “Free Falling” as the Dow Jones Industrial Average fell 5.7 percent from April’s close to end the day at 10,379.60.

The following Monday, May 10, the Dow was up 404.71 closing at 10,785.14 and we broke out in song singing “Up, Up and Away in My Beautiful Balloon” by The Fifth Dimension. Meanwhile, officials continue to investigate computerized trading glitches and possible human errors that may have triggered the May 6 wild market gyrations.

How we handle these roller coaster rides depends on whether or not there’s an investment strategy plan in place. No two investors have precisely the same goals, attitudes about risk or the same finances. That’s why your plan should be unique and take into consideration many factors to help you avoid knee-jerk reactions to market conditions.

Learning

In your 30s and 40s you’re learning and it’s still early in your career. Now is the time to establish regular savings habits that adjust upward as your income grows. You’ll benefit from the 8th wonder of the world which is the magic of compounding returns. That is, money saved in your 30s, compounded at historic market rates of return for 30 or 40 years, can help provide you with an impressive retirement nest egg.

Earning

Your 50s through early 60s are generally prime earning years, take advantage of them. Maximize contributions to retirement plans and maintain a strong equity component in your portfolio, but consider preserving capital with a slightly more conservative blend of investments. This may be the time to assess the role of long-term health care planning and insurance in your portfolio.

Whether you retire in your 60s or work into your 70s it may be time to think about adjustments to your portfolio. Choose a mix of assets designed to outpace inflation while also protecting you against extreme market volatility. Set spending goals that reflect lifestyle versus essential expenses, as well as possible medical expenses.

Yearning

The goal is to achieve rather than yearn for the peace of mind that financial security brings. Financial planning never ends, it just shifts gears. Align your assets with your chosen diversified mix and decide how to best arrange an income stream. Maintain a long-term view of your investments—retirement could last 20 to 30 years or more.

Out of our control

International, political and corporate events impact the market. Current headlines highlight the troubles within the European Union and Greece as well as the attempts to contain the oil leak from the BP well into the Gulf of Mexico. Keep an eye on the Euro and the actions of the European Union which has subdued Grecian fears for the time being. The markets are twitchy in spite of U.S. reports that show moderate economic recovery.

During 2008 and into early 2009 almost everything went down at once. Over the long run, different assets classes (stocks, bonds and cash or cash alternatives) tend to provide their strongest returns at different times. In other words, you need to spread your money around if you’re going to capture the best performance of the various asset classes.

The tough question is how much to put in each category, and the answer is it depends on your personal situation. There’s no magic formula for success and asset allocation does not ensure a profit or protect against a loss.

Some say that the “Great Recession” may be over, but the extraordinary steps adopted to combat it are going to have lasting repercussions. Exactly how things play out remains to be seen, and wise investors will pay close attention to what central banks and governments do over the next few months.

The world is changing and globalization is here to stay. The U.S. economy is still the biggest player, but other countries such as China and India are growing much faster. The World Bank projects annual gross domestic product (GDP) growth of about 2.5 percent for the United States from 2010 to 2014 while the projection for China could be as high as 9.0 percent and 7-8 percent for India.

Many analysts suggest that long-term investors own stocks and bonds of non-U.S. securities. How much is open to debate. Overseas exposure may be obtained by owning big U.S. based multi-nationals with a large percentage of their earnings from overseas exposure, but going that route doesn’t give you participation in the growth of other economies. Again, this is why it’s so important to understand your own needs and attitudes towards risk.

And as always, women really do have special investing needs for the obvious reasons; we live longer and generally accumulate less wealth. Planning for multi-stage financial needs is important too. I prefer to get my adrenaline rushes at an amusement park or from fast cars; anyplace other than my investment portfolio. Invest accordingly.

This article provided by Darcie Guerin, financial advisor and branch manager of Raymond James & Associates, Inc. 606 Bald Eagle Dr. Suite 401, Marco Island. Gulfshore Life Magazine named Darcie as one of the Best Personal Wealth Managers in The Southwest Florida Area for 2009 and 2010. She may be reached at (239) 389-1041, email Darcie.Guerin@RaymondJames.com or visit website RaymondJames.com/Darcie.

© 2010 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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