Word: portfolio
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...stock market may be down 40% this year, but your portfolio has other assets too - or at least it should. Balanced funds that hold bonds and cash along with stocks are down just 29%, according to mutual-fund tracker Morningstar. And many retirees looking to minimize risk wisely hold a smaller percentage of stocks than the average balanced fund (and also may own insured bank CDs). Which means a more typical experience for them is a 20% loss, says Gregg Fisher, president of Gerstein Fisher, a financial adviser in New York City. That's not fun, but it's nowhere...
...drop makes no sense for most people. Dozens of studies have shown that if you wait for confirmation that a recession has ended before you buy, you'll all but miss the corresponding rebound in stocks. One model dating back to 1926 shows that a high-quality portfolio of just 60% stocks (and 40% bonds) returns an average of 11% per year in the first five years following a trough in the economy. That may be all you'll need to get even...
...starters, prices are being slashed on everything. And if the current malaise drags on, it will take a major bite out of inflation - one that could literally offset the decline in your portfolio. "The real enemy of retirement is inflation," notes Fisher. He points to this model: Say you have a $2.5 million nest egg that is growing 7% a year. In one scenario, you have no extraordinary economic events and normal long-term growth that produces inflation of 4% a year as you age from 65 to 95. In the second scenario, a severe recession knocks your portfolio down...
...that Freddy y Joel's is thriving, I'm going to step back and let Freddy start baking at 5 a.m. and close his shop at 9 p.m., while I get involved with other loans in my portfolio. I'm also going to give kiva.org gift certificates to all my consultant and business-school friends, so they too can annoy hardworking people around the globe. By the end of next year, I predict the developing world will not only be economically thriving and significantly more diabetic but also regret ever getting involved with microloans...
...economy grows worse. Fox-Pitt Kelton's Trone also points out what's not included in the government backing: $129 billion in nonresidential consumer loans like credit cards, auto loans and small-business, student and personal lines; $150 billion of consumer loans overseas; and Citi's corporate-loan portfolio. Put simply, there's room for more to go wrong...