The recent stock market collapse has shaken investor confidence. Looking at your retirement portfolio isn’t fun anymore. It’s downright nerve wracking to see how much your 401k balance has eroded just over the past month. Heading into 2019, we outline three investing tips for your consideration.
It’s Time To Play Defense
After 114 months of economic expansion in the U.S. (the second longest in U.S. history), investor’s need to brace for chance. Recent economic growth was boosted and extended in this cycle by the tax cuts signed into law late last year. Also, the government’s budget included new spending which helped propel the economy forward.
Looking ahead, these expensive fiscal boosts to an aging economic cycle will come with a hangover. That hangover is called rising government debt and deficit – and also mean there’s less in the fiscal punch bowl to stimulate the economy once the next recession hits.
If you haven’t pared back on some of your risk assets, like stocks, it’s time to take a look at your portfolio and play defense.
One of the best proven ways to protect your portfolio is diversification into gold. Buying and holding up to 15% of your portfolio in physical gold is a proven method to improve total portfolio performance during hard times. When stocks fall, the price of gold rises – usually significantly. Gold has been a store of wealth for centuries. It’s time now to protect a portion of your asset in gold. Stop watching your 401k balance go down. Owning gold can offset those losses.
Consider Diversification Into Rare Coins
If you have a long term time horizon, some of the most significant price appreciation in the tangible asset arena usually occurs in the rare coin sector. The key to success is to purchase the highest quality coins you can afford. Just like in real estate where the mantra is location, location, location. In rare coin investing, its rarity, rarity, rarity. When you combine quality, with rarity the outcome can be quite financially rewarding.
Time for Your Quarterly Portfolio Review and Rebalancing
Once a quarter, or at least once a year, it is smart to review your overall portfolio. Here’s some items to analyze your assets.
- How much are you saving each month? Is it enough to reach your long-term financial goals?
- How much debt do you have – and what kind of debt is it? Financial pros say there are 2 kinds of debt – “good” debt – like mortgages, student loans or perhaps even business loans. These types of debt allow you to potentially build wealth over time through home ownership, or an educational degree that can open the door to higher lifetime income, or a business that could take off and allow you to be your own boss. Then, there’s “bad” debt, typically considered to be high interest credit card debt. If you are carrying high interest debt, it’s time to make a plan to pay that down in 2019.
- How are your portfolio assets diversified? There is a typical rule of thumb to take your age, minus it from 100 and that is the amount of money that you may want to invest in the stock market. The remainder should be invested in safe assets, like physical gold, or a mix of gold and fixed income bond investments. So, if you are 50, – you may be okay investing up to 50% of your portfolio in the stock market. The rest? Make sure you diversify into other assets like physical gold that will act to stabilize and improve portfolio performance over time.
Make 2019 your best financial year ever! Follow our three investing tips and get started today.