Don't Give Up the Ship
Even though the seas around us have become stormy with housing troubles, unemployment, low interest rates, European debt problems, US debt problems and wild stock market prices, we all still have to continue to sail our ships and continue to fund our future retirement income sources.
There is no doubt that the seas will eventually calm and the sailing will eventually become smoother. But for now, we must continue to sail the ship. It would be important to point out that for those of you who are still saving for the future, you are (or should be) taking advantage of the opportunity to buy shares of the world’s greatest companies at prices that are reduced from what we paid just months ago. This means that for the same monthly investment you are buying more shares which, when the seas improve, will increase in value more than the pricier shares you bought last year. Who doesn’t love a sale?
For those of you currently in the income phase of your retirement plan, there are still opportunities in this stormy environment. The dividend yield on the world’s greatest companies is now multiples of the government bond yield (as well as that of bank CDs) and could be an option for generating income at this time. And when the world economic situation improves (as eventually it always does) you could experience a bit of growth to go with your income.
Bonds are close to the end of the greatest bull market they have ever seen and as interest rates eventually begin to rise the prices of bonds will fall. This could possibly hit retirees with a double blast of low income followed by falling prices. Tax-free municipal bonds have shown yields exceeding their taxable cousins and may provide a bit of a safe haven in this environment. When combined with those dividend producing blue-chip stocks they could provide the base of an all-weather portfolio designed to provide income while you ride out any storm. As always, consult with your advisors when reviewing these options.
Don’t abandon ship. At least our leaders are talking about, and taking action to solve, our worldwide financial problems. The problems didn’t happen overnight and they won’t be solved overnight either. Take action to steer your financial position to take advantage of this environment and to protect your retirement funds from future blows which are sure to come. Continue to get your finances in ship-shape by reducing debt, increasing cash reserves and continuing to fund your retirement accounts.