Feeling good about stock market lows?

Never have I spent more time on a blog, then I have this week.  I generally start writing each week’s blog on Sunday.  That way I can provide my readers with current information followed up by guidance on the latest financial news. This week has been somewhat bipolar.  I intended on writing about the stock market lows that started a week ago.  Until now.

Before Thanksgiving, I blogged about the stock market’s rise and some things that you should consider during a rising market.  And, boy was it a rising market.  I use the S&P 500 index as the benchmark for measuring stock market changes.  Folks are indeed used to using the Dow, but it includes only 30 stocks, while the S&P 500 index includes 500 stocks and provides a broader measure of overall domestic stock market performance.

So where are we now?  Last Friday’s (12/12/14) close was a smidge above 2000.  Monday’s close was a smidge below 2000.  Tuesday was another major crash and the rest of the week has been a major rebound.   Will this volatility continue?  Only time will tell.

We’re now back to stock market highs, rallying from 2000 to back up to 2070+ in one week’s topsy-turvy time.  Just in case this irrational exuberance doesn’t continue, and the Federal Reserve doesn’t keep rescuing the market by keeping a lid on interest rates, then don’t panic and consider some of the following suggestions.  Some of these might just help you be better positioned in the event that the market does reverse its position and head lower.

1) Avoid selling low and buying high.  I know some very bright folks who exited the market in mid-2011 shortly before the U.S. government’s bond ratings were downgraded in anticipation of a market tumble.  They guessed right in the short term.  The markets did tumble.  Unfortunately for them, the markets went on to set all-time highs ever since. Some are still sitting on the sidelines.

2) Continue to use Dollar Cost Averaging (DCA).  DCA took a hit to its reputation during the financial crisis.  Let’s face it.  We lost hope in all investments.  DCA means that you will invest steady regular amounts during both stock market highs and lows and the average over time will result in wealth accumulation.  Got any better ideas?

3) Does rebalancing within an asset class also make more sense now?  For example, suggested stock allocations include international stocks, emerging markets stocks, small-, mid- and large-cap stocks.  You can further break down stocks between “value stocks” and “growth stocks”.  Are you underinvested in one category while being overinvested in another?  When I looked at my own investments recently, I decided to make some adjustments.

4) Don’t try and time the market.  On any given day on CNBC, the money pros interviewed sit on each side of the market.  That means that some believe the market is going down and some believe the market is going up.  Stick with DCA over the long haul and get ready to deploy a portion of next year’s raise or cola into your savings and investing plan. And, finally,

5) Focus on the long term. This was easier said than done in 2008-2009. Panic set in and some of us headed for the sidelines. So if you had to do it all over, would you still head for the sidelines?

Behavioral finance has been dealing with the above behaviors for a long time. If we’ve learned anything from the financial crisis, it’s how to deal with the ups and downs of the market while pursuing wealth accumulation and financial freedom.

Stay the course, be diligent and stick with your plan. Keep your emotions on track. Seek guidance when necessary and avoid chasing performance.

Because as I’ve always said, it’s about life and how you live it!

In the spirit of financial well-being,

Paula Cashflow

Feeling good about stock market highs?

Check in on these five things now?

Over the last four weeks we’ve experienced a mini stock market crash of almost 8 percent. Although 8 percent is not considered “correction” territory, many investors found themselves feeling anxious about the future. Luckily the rebound has been astronomical and not only have we recovered the 8 percent, but the stock market has gone on to set all time new highs. The S&P 500 is currently above 2030, an increase of about 10 percent this year. If these highs and lows or “volatility” continues, and all arguments point to the fact that it could, does it now make sense to take advantage of these times and make changes to your investments? Take a look at these five suggestions to see if they have merit for your qualified and tax deferred plans. Continue reading

5 Go-To Financial Behaviors

5 Go to Financial Behaviors

 For financial freedom

If I could condense twenty or so years of wealth accumulation onto a 3 x 5 index card, and keep it handy as a refresher, this exercise would reinforce good personal finance behaviors.  My mom is a fan of 3 x 5 index cards and has encouraged me to use them for the simplest reminders.  Even in this day of mobile lists, downloading, songs, streams, and tweets, writing down these five behaviors in your own handwriting and referring back to them frequently will result in a larger Personal Financial Statement over time. Continue reading

October Cashflow update

Time to refresh your PFS or Personal Financial Statement.

Back in July, I introduced the concept of quarterly financial updates.  If you choose to work with a financial advisor, chances are they will encourage quarterly meetings.  I usually did with my client base.  Although, I found that my clients after a year of these meetings were comfortable with the relationship and chose to forego the quarterly meeting.  This was actually okay, because I was working behind the scenes keeping close watch over my client’s overall financial picture.  Continue reading

Financial Planning is Healthful

My mother is an avid reader and she’s always giving me newspaper clippings, dog-earred magazines, blurbs, etc. penned with ideas she considers to be valuable information that I MUST read, right this minute.

Her intentions are always good and, most of the time, I do read the bag full of clippings that she sends home with me after our visits.

But this week, Viviane (Paula Cashflow’s mom) nailed it!  Continue reading

Borrowing from your 401k

Whether you’re a spender or a saver, most of us will need to borrow money at some future point in our lives.  It’s inevitable.

Back in the late 1990’s when my income was much less, I borrowed money from my 401k.  In the spirit of full disclosure, I am not a fan of borrowing from 401k funds.  Therefore, I think it is necessary to have a healthy conversation about why 401k loans should not be part of a wealth accumulation strategy. Continue reading

Life Insurance 101: Part One

As Open Enrollment season approaches, you might have the option to choose employer provided life insurance. Generally, most companies offer a no-cost group life insurance option limited to one- or two-times your annual salary. Needless to say, this is not an employee benefit option that anyone should pass up.

Here are some things to consider this open enrollment season when evaluating your benefits plan for 2015. If you are in any of the following categories, you MUST consider electing this coverage: Continue reading