New Rules for Personal Finance, Especially for Older Investors

For many people, that’s as far as their knowledge of asset allocation goes, but in today’s market, that’s not far enough. This begs the question, “What does it mean to be diversified?” It used to mean that you let your financial adviser pick out some growth funds, some income funds, and (if you were bold) a sector fund. The rest was kept in bonds. Individual stocks were frowned upon as posing too much risk.

Now we know that many stocks chosen to provide mutual funds’ stellar performances were risky, but somehow no one noticed. In hindsight we’ve learned that the returns on those trusty funds were no better than the Wall Street companies who were fabricating puffed up returns using artificial financial “tools.” And we thought they were safe. Oops.

John C. Bogle of Vanguard still stands by his products, and rightly so. Vanguard Mutual Funds were some of the best for over 30 years. He still holds by the bond vs stocks rule-of-thumb, but his approach probably won’t right the destruction wreaked on America’s retirement accounts. (Like mine for one!)  And the steep curves of the S &P are still making most investors nervous about how to plan their personal finances in the future

For years retirement planning was the result of mapping out a financial plan of how much you would need to live on once you’ve retired, and then figuring out how to pay for it. A combination of social security, savings, IRAs, or other financial investments once added up to a fairly predictable equation. Unfortunately, it’s been disrupted by the unexpected disclosure that our economy is teetering on disaster. Market globalization is moving the power of equity to those countries that have developing economies and the best-educated students. Hmmm. What are we to do?

First, if you can’t beat ‘em, join ‘em. Investing in foreign stocks may seem very un-American, but that’s where the growth is.

Second, think differently about diversification. Do you own real estate? Foreclosures make attractive investments. Do you own precious metals? Are you aware of the new types of equities that are trading on the stock market? Do you take time to learn about global economic trends and how that might help to enhance your retirement goals in the next 5-10 years?

A year ago, I took a look at my personal finances and realized my investments were hardly diversified. My financial adviser had done well when the market went up. Then it bombed and so did all if the mutual funds in my account. I decided to take back control with the help of information provided through Wealth Masters International (a company that helps people to get their personal finances back on track and provides comprehensive knowledge of global trends for asset decision-making). Since last July 2008 I’ve been allocating my assets differently and seeing real results. I’ve also been taking WMI’s recommendations. I’ve done my own financial research, and put together a diversified group of stocks and EFT’s in my portfolio. Again, with some knowledge, the choices are more obvious than you’d think.

So even though there are new rules when it comes to investing, if you keep an eye on diversification and global trends, you’ll be putting the odds in your favor.