The investors that have been wiped out in this downturn are the ones that did not plan ahead, says Steve McDonald. Booms and busts are the nature of economic cycles. And investing only in stocks is financial suicide. Steve says to survive this crisis – and the inevitable ones that follow – investors need to diversify their portfolios and stick to tried and trusted models.
Last week, we looked at the problem looming in many established blue-chip companies that pay dividends now and may not later. They have heavy pension obligations bearing down on them.
These problems should be stated in financial reports. But sometimes they are hidden in plain sight. A bit of dubious padding in pension plan earnings projections can neatly camouflage millions in shortfall.
By the way—even if you are not buying dozens of stocks for their dividends, this is something good to know. It will help you evaluate those slick plans that brokers, bankers and insurance salesmen hold out to you when you take out life insurance, buy an annuity, set up a 401(k) or do any long-term planning yourself.
Let’s start…
Chasing market moves is the worst way to invest, says Steve McDonald. And piling everything into one asset class will not work either. Over time, you will always make more money with a balanced portfolio. That means a suitable combination of stocks and bonds. Steve comes up with a simple formula to find a portfolio split that works specifically for you.
The International Monetary Fund (IMF) has downgraded world growth to 3.9% this year, from last month’s estimate of 4.1%. Next year’s outlook is also down – from 3.9% to 3.7%.
The Sovereign Society’s Eric Roseman predicts a far harsher global outlook. He says the world economy is staring down the barrel of the worst recession in 20 years.
This means it’s time to shift your focus to the securities that can protect your wealth from deflation. Eric says gold, high-quality Treasury bonds, non-financial A and AA corporate bonds and the U.S. dollar are your best bets…
Editor’s Note: DailyWealth’s Steve Sjuggerud thinks there is an extraordinary opportunity for investors in the bond market.