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The past year has been brutal on majority of investment accounts. The sub-prime mortgage meltdown, the credit crunch have all strained liquidity out of the market and put enormous stress on businesses. The resulting macro-economic issues have worsened the pain on the average consumer. Amidst all this mess, most retirement accounts have taken a beating in stride with the market or even worse in some cases. It’s only natural to ask “How do I stop the bleeding?”. A recent article attempts to address and answer this very question.

One great call out in that article is about asset allocation or diversification strategy. We have heard it enough times already, but yet we don’t take the time and effort to implement diversification in our own accounts.

I am not an expert in the field of investing (either by professional education or licensing) but I have keen interest in investing for my own personal investing and I read a lot on the subject and talk to other experts in the field. So I couldn’t help but want to share this with our readers. You can take it for what it’s worth.

In my opinion, following is a strategy that would take us a long way

• Decide a Diversification strategy that is suitable for your risk tolerance: One needs to have exposure to stocks (domestic and international), bonds, commodity and real estate to name just a few and the percentage of your portfolio you are willing to invest in each category (To learn more about Asset Allocation from the SEC click here; or to use an interactive asset allocation calculator click here)
• Choose your picks for investing into each of the above categories. It can be individual stocks and bonds OR Mutual Funds OR Index Funds OR Exchange Traded Funds (ETFs) and so on. Each has its pros and cons. Based on my research, I prefer or recommend Index funds and Exchange Traded Funds because of their low overhead costs. There is a wide variety of these funds available. Click on the links above to find out your options and use the tools there to choose your index funds and ETFs
• Invest in the selected funds in the selected percentage amounts and
• Finally, discipline yourself to rebalance your portfolio at a pre-determined frequency you are comfortable with (For more insight on this topic, read this article on Motley Fool)

My rationale for the above approach is:

• Picking right stocks at the right time is called market timing and even the pros find it difficult to do it well consistently
• If someone’s portfolio went down a lot and they are asking how to stop the bleeding, then thinking they’ll be able (either in terms of knowledge, time or knack) to pick the winners this time around is a very big and risky assumption in my opinion 
• Funds with high overhead costs eat away a portion of your returns and reduce the amount available at retirement and can be substantial over an extended period of time
• Over long periods of time that one’s career lasts, market indices and funds based on those indices (or index funds) have returned more value to a patient investor and
• this approach limits the amount of time and energy one needs to spend doing their investing rather than enjoying other activities

This is my 2 cents on the topic. Please post your comments, thoughts and ideas on this subject.

Do not undermine your worth by comparing yourself with others.
It is because we are different that each of us is special.

Do not set your goals by what other people deem important.
Only you know what is best for you.
Do not take for granted the things closest to your heart.

Cling to them as you would your life, for without them, life is meaningless.
Do not let your life slip through your fingers by living in the past nor for the future.
By living your life one day at a time, you live all of the days of your life.
Do not give up when you still have something to give.
Nothing is really over until the moment you stop trying.
It is a fragile thread that binds us to each other.

Do not be afraid to encounter risks.
It is by taking chances that we learn how to be brave.
Do not shut love out of your life by saying it is impossible to find.
The quickest way to receive love is to give love.
The fastest way to lose love is to hold it too tightly.
In addition, the best way to keep love is to give it wings

Do not dismiss your dreams.
To be without dreams is to be without hope.
To be without hope is to be without purpose.
Do not run through life so fast that you forget not only where you have been,
but also where you are going.

Life is not a race, but a journey to be savored each step of the way.

Thanks to StoryBin for this wonderful thought. You know, only you can decide how you should live and grow. So slowdown, take  a deep breath and enjoy every moment of your life. Live your life by your own standards.

Recently, Jacky Hood, Author of a book on expanded careers for Baby Boomers posted this recommendation for Boomer411 in her blog. She highly recommends people to try Boomer411 saying that it has a wealth of useful and fascinating information for Baby Boomers. Thank you Jacky.

We had recently posted an interview with Jacky and her work in this blog. You can find it here. You can also read more about her book from her publisher by clicking here. For anyone thinking about career options in the second half of their lives, this book contains a wealth of information.

A recent article talks about when should a Boomer retire? It provides views from experts in the field. The background to this discussion is that many Baby Boomers do not have enough saved to substitute for their main source of income. This means they either keep working longer OR reduce their standard of living. If you have enough saved to support you for the next 3-4 decades in retirement, then you can retire when you want to. For those that do not have enough saved, Alicia Munnell, Director of the Center for Retirement Research at the Boston College recommends people to work until they are 66 years. Others think this is very conservative. For example, Marc Freedman, founder and CEO of think tank, Civic Ventures suggests that people work until they are 70 years of age to make sure they can finance their lifestyles for the rest of their lives.

When the talk about retirement age comes up, invariably I think about the definition of retirement. You know, in the traditional sense, retirement is where you give up working, just stick around the house, may be volunteer a bit or travel and just spend the remaining years in solitude. There is debate whether this was ever the case, but never the less, this is the common perception of debate.

 Considering the health and active lifestyles people in their 60’s and even 70’s in many cases lead, there is a new saying these days that 60 is the new 40. For example read this article about an Australian Rider, Laurie Lever, who at age 60 is taking part in the Beijing Olympics. Although Laurie Lever began riding when he was 10 and has been a showjumper by profession, he says it took him this long to find a real ‘winner’ horse. Though he hasn’t won yet, Laurie you are a real champion. 

Coming back to our discussion, a retirement now means more like I might still work, but it will be on my terms, when I want to and how I want to. As opposed to working for someone or working long hours day in and day out. I can afford to take this approach only when I have the financial wherewithal to support myself and my family to live, enjoy and give. The more disciplined we are in our financial matters, the sooner this time will be.

So take that next step to your own financial freedom and build on and grow your discipline.

It sure is great watching the athletes compete to win the gold medals. Especially watching Michael Phelps on his gold medal spree, he makes it look so easy, like a child’s play to swim and win those races. But we all know that these athletes spend many years preparing, training and practising for this moment, to win the Gold Medals. If you can pause for a moment and visualize their lives, they spend many hours per day training and practising, foregoing other pleasures and activities that we all enjoy. All with an aim to win that gold medal. A single-minded focus on being the best, winning the race and taking home that coveted prize. Their every action, every thought is to take them closer towards their goal.

Well, just as these athletes have a clear target and how it motivates them and inspire them to strive and prepare, each one of us can transform ourselves into achievers only if we also had a clear target like them. Be it a healthy and happy retirement, be it living on the beach in retirement or whatever your target gold medal may be.

Do you know what gold medal you are striving to attain?

If not, take some time to think and clearly define what it is that you want to achieve in your life? If you already know your gold medal target, work on visualizing it as vividly as possible, put together a plan for what you can accomplish this year to get there and focusing your thoughts and actions on achieving it.

Enjoy your journey to the gold medal as much as you’d enjoy the achivement of that goal.