Since 1926 There Have Been 8 Bear Markets
The 8 bear markets since 1926 lasted an average of a year and erased an average of 33% of your investment portfolio. Would losing a third of your portfolio change your retirement plan? I think it would.
There aren’t many things more stressful than watching the financial news and seeing the stock market gyrate up and down on a daily basis. That stress is exponentially magnified In times when the stock market is crashing.
We Plan For Bear Markets
We know bear markets are a part of the investment process. We also know how to plan for them!
Part of our Retirement Architect process includes an extensive analysis of how bad stock markets will affect your retirement plan. If a particularly bad market will knock you off course, we’ll discuss adjusting your risk exposure and overall retirement plan.
However, we also expect bad markets. We can’t control the economy or the stock market, so our best option is to minimize the damage while actually profiting from it! That sounds like an oxymoron I know, but “bear” with me (pun intended.)
Are You In The “Right” Investment Portfolio?
If you’re worried about the stock market crashing, you probably aren’t in the right portfolio to begin with. We start the retirement planning process by making sure you’re invested in the most appropriate portfolio for your needs and goals for the future!
This includes a combination of modeling your risk required and risk capacity from your Retirement Architect plan. Only with a plan can we determine how much risk you “need” to take and how much risk you can “afford” to take without subjecting your retirement to financial catastrophe.
Finally we blend those results with your risk tolerance from proven—award-winning—tools like Riskalyze. The Riskalyze process helps ensure the risk you’re comfortable with is the risk you’re exposed to.
The combination of those three things—risk capacity, risk required, and risk tolerance—ensure you’re in the best portfolio for your unique retirement needs and goals. While no one likes bear markets, if you’re in the right portfolio a bad market shouldn’t bother you nearly as much!
One strategy to actually make money when the market is going down is rebalancing. Rebalancing is the process of buying assets that were beaten up (most often stocks), by selling assets that did well (typically bonds.) This forces you to “buy-low and sell-high.”
If you’re retired and living off the retirement income your portfolio generates, this can be a problem, however. Your expenses don’t stop just because the market turns sour. That’s where the Bear Bucket and Bear Slider strategies can help you enjoy retirement with confidence!
Bear Bucket Strategy
“Bear Bucket” is a term we coined to explain how we use an ultra-low risk “side pot” of money that can be tapped for your retirement income needs in a bad market. This allows you to maintain your normal retirement income and spending habits without selling shares of beaten-down stocks cheap!
It also allows you to profit from a bear market! Since you’re drawing income from your stable Bear Bucket, we can now rebalance your normal investment portfolio, typically buying stocks cheaper and selling bonds at higher prices.
But what happens if your Bear Bucket runs dry? While the average bear market lasts about a year, some of them run much longer. That’s where the Bear Slider strategy comes into play.
Bear Slider Strategy
“Bear Slider” is a term we coined to explain how once your Bear Bucket runs out (IF it runs out) we make a conscious decision NOT to sell growth assets while they’re depressed, but rather only liquidate less volatile fixed-income assets, allowing your growth investments to recover over time.
The beauty of a Bear Slider is it forces you to increase your asset allocation to stocks exactly when you should, when the market is cheap! Who doesn’t want to increase their stock allocation in the pits of a nasty bear market? While that may sound scary to most retirees, you’ll be thankful you did when the market recovers (and it always does eventually.)
Diversified Investment Tools
Finally, part of our investment strategy includes using investment tools with downside protection. Specifically speaking, we diversify your portfolio using structured notes.
With structured notes we can provide some downside protections while maintaining your growth objectives over time. These are highly complex investments, and we’ll discuss them in detail before implementing them within your retirement plan.
The Stock Market Crashing Shouldn’t Scare You Anymore!
It’s true! Our process is so comprehensive we’ll show you how bad stock markets may—or may not—change your life. You’ll understand the ups and downs and how we’re using market volatility to not only survive bear markets, but ultimately thrive through them!
If the stock market crashing keeps you up at night, we should talk! There is a better way to maximize your retirement and live the life you’ve always dreamed of with massive money confidence!