This blog was updated on March 10, 2020.
NASDAQ went from a low of 1,577.03 on December 30, 2008 to a high of 9,700 by February 18, 2020. That is a 6-fold+ increase. Those kind of returns, 46.8% annualized over an 11-year period, can compound your contribution and gains dramatically. As you can see from the chart below, if you were depositing $10,000 into a tax-protected retirement account, and investing in the NASDAQ Composite Index through an index fund, you'd have over half a million in just 10 years.
If your nest egg isn't worth significantly more today than it was in 2009, that's a sign that your financial plan is faulty.
Have you spent the last decade, until very recently, trying to gain back losses? That’s a red flag that you are adhering to a 20th Century Buy & Hope strategy that hasn’t worked at all in the 21st Century. There is a time-proven system that works. It’s time to learn it.
Did you sell low at the bottom of the market, thinking we were headed into a Depression? Are you tempted to jump in now and join the party? That is investing based upon emotions – which is always going to be on the wrong side of the trade – selling low and buying high. It is also possible that you have been led astray by listening to the wrong advice.
In truth, a properly diversified plan would not put the entire $10,000 annual contribution into NASDAQ stocks. However, this calculation is a sobering reminder of the opportunity cost of:
* Neglecting to fund your retirement accounts,
* Opting to pay off old debts before you contribute to your own future,
* Waiting until you pay off debt to invest,
* Hoping that someone else will manage your money for you
* Following headlines or investing based upon a hunch, an email or a friend’s recommendations…
Our easy-as-a-pie-chart nest egg strategies with annual rebalancing earned gains in the last two recessions and have outperformed the bull markets in between. Why? Because:
* You always keep enough safe, which limits your losses in a downturn,
* Your investments are properly diversified, which adds stability and increases performance,
* Adding in hot industries and countries increases performance, too,
* Overweighting safe when there is greater risk of a correction is a better strategy than market timing,
* Annual rebalancing is a Buy Low, Sell High system on auto-pilot,
* The pie chart takes the emotions out of it, prompting you to do what you are supposed to do.
In today’s world, you also have to know what’s safe at a time when:
* Bonds are overleveraged and vulnerable to loss of principal,
* Money market funds have redemption gates and liquidity fees and,
* Long-term securities are high-risk, with low reward, and expose you to illiquidity and opportunity costs.
It’s time to know what you own, to be the boss of your money and to adopt 21st Century strategies that work. Call 310-430-2397 or email info@NataliePace.com to register for our next Investor Educational Retreat. I am also offering an unbiased 2nd opinion on your current strategy. Wisdom is the cure.
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Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace 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.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.