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June 24, 2013

Protect Yourself from the Wall Street Tsunami.

by Natalie Pace.

Oh the glory days, when anybody could jump in the water and have a great time.

Performance of the Dow Jones Industrial Average
January 1980 - January 2000

Source: Money.MSN.com. Used with permission from Microsoft.

As you can see from the chart above, buy and hold investors enjoyed many decades of great returns in the 20th century. Below is a chart that shows what has happened to the Dow during this millennium. As you can see, it's quite a different picture.

Performance of the Dow Jones Industrial Average
January 1950 - May 2013

Source: Money.MSN.com. Used with permission from Microsoft.

Buy and Hold investors have gotten killed on the Wall Street Tsunami for the last 13 years. Those who rely on "financial professionals" to surf these storms are vulnerable to being crushed again. And again. And again. Not because financial professionals can't surf, but because surfing tidal waves crushes all but the global top five surfing champions.

The uptides are fun, but if you aren't cognizant of the coming crash and scrambling to get safe, you could be crushed again. And most Americans are underwater, even with the markets higher than they've ever been, because every time you lose half of your assets, it takes twice as long to crawl back to even -- just like an injured athlete. 10% gain on $100,000 is $10,000, where as 10% gain on $50,000 is only $5,000. So, a loss of half could take 11 years to recover (at 7% annualized return). Bottom line: most Americans are still underwater on their nest egg, even though the Dow is near an all-time high.

If you think that there is a magic bullet -- like gold or the Apocalypse portfolio -- then you might just be making someone else rich. Just like the 12 million people who believed that real estate was the only answer in 2005, only to lose their homes. Gold has given back 31% of its value since the September 2011 high. Even oil, an American diet staple, has a tsunami stock chart.

There is a plan that is working, and it is easier than you might think. It is so simple, in fact, that even office administrators and handymen are profiting. It involves staying safe on shore, and betting on the top surfers, rather than betting on every novice who jumps in the water. By "top surfer," I mean the companies that are making great products and operating with low debt and high profit margins. Sadly, many of America's legacy brands have very high debt, with low profit margins -- the kind of vulnerability that gets crushed in today's economy.

The nest egg plan is "easy-as-a-pie-chart," as I often say. In addition to diversifying and avoiding the bailouts, you must rebalance your ten funds annually.

If you want to learn and employ the only strategies that have worked since 2000, then register now for my Florida Beachfront Investor Edu Retreat, to be held Sept. 14-16, 2013 in Cocoa Beach, Florida. If you register by July 10, 2013, then you will receive a free 50-minute private prosperity consultation. Call 310-430-2397 to learn more.

Read below for an outline of the strategies you need to be implementing to profit during today's Debt World and ongoing economic storms.

Master Plan for Surfing the Wall Street Tsunami

  1. Keep a percentage equal to your age safe.
  2. Know what safe is. Bonds used to be, but they are downright dangerous in a Debt World, and are vulnerable to both credit risk and interest rate risk in the coming years.
  3. Overweight safe before a crash, and paddle like mad to catch the wave. This is not market timing. It is risk management. Don't jump in and out of the markets. Get safer in recessions; have fun in bull markets. And never confuse a bull market for wisdom.
  4. Diversify your "at-risk" portion into 10 funds: small, medium, large, value, growth and four hot industries (instead of having 10 pages of stocks).

    It is more manageable, and you can see and capture gains, while paying far less in fees.  

  5. Jettison the bailouts. The most vulnerable companies and industries are easy to identify with my Stock Report Card™.
  6. Add in hot industries. The hottest companies and industries are easy to identify with my Stock Report Card™.
  7. Rebalance 1-3 times per year. This is much easier when you know what you own and have a pie chart plan, than it is when you have pages and pages of holdings and no master plan.

Start by reading The ABCs of Money. The book is free this month. Simply go to NataliePace.com and click on the book cover. If you write a review of The ABCs of Money and share that review with your friends, then you'll receive a free 21-day Walk to Wealth coaching call series (value $95).

You must protect yourself from these storms, if you want to avoid getting crushed again. There are very few surfers who are able to ride the Wall Street Tsunami to victory. However, those investors who know how to keep enough of their money safe, and bet only on the Laird Hamiltons of the world, can do well.

It may sound difficult. But it is easy as a pie chart.

Call 310-430-2397 now to learn more about my Sept. 14-16, 2013 Beachfront Investor Edu Retreat. (It will be a beachfront retreat at Cocoa Beach, Florida, so it counts as a vacation, too!)

 

About Natalie Pace:
Natalie Pace is the author of the Amazon bestsellers, The ABCs of Money and You Vs. Wall Street. Her financial literacy strategies have saved homes and nest eggs for more than a decade, while also making shopping for stocks more fun than shoes. Natalie Pace is a blogger on HuffingtonPost.com and a repeat guest on national television and radio shows such as Good Morning America, Fox News, CNBC, ABC-TV, Forbes.com, NPR and more. As a strong believer in giving back, she has been instrumental in raising tens of millions for public schools, financial literacy, the arts and underserved women and girls worldwide. Follow her on Twitter.com/NataliePace and Facebook.com/TheABCsofMoney. For more information please visit NataliePace.com.

Please note: NataliePace.com does not act or operate like a broker. We report on financial news, and are one of the most trusted independently owned and operated financial news corporations in North America. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned in this article are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

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