The purpose of my work here is to do all things possible for you to get a better handle on your finances and to make better, if not more informed, financial decisions. This article will do two things; look at the economy at the 30,000 foot level with the spotlight on women and investing. Whether female or male, your job is to understand where there are headwinds and tailwinds in the economy today.
Then you want to see what you can do to help ensure you have the resources when they are needed, whether or not others call it the best of times or something else. The intention here is for women, in particular, to focus on the overall economy, along with their own home economics, as it not unusual for women in the household to be the survivor as well as the sole decision maker.
Women control over 60% of the personal wealth in the USA, according to Catalyst, 2012 and 45% of the millionaires in the country are women, reports Virginia Tech Women in Leadership and Philanthropy, 2010. Women live on average 4-6 years longer than men in the US, a 65 year old female has a 42% chance of living to 90, and up to 90% of women will be responsible for their own finances at some point, according to Life Expectancy Study, June 14, 2010 and UP-94 Mortality Table Society of Actuaries.
Here’s what Harry Dent wrote on March 14, 2016, “The story on Wall Street and CNBC continues to be that we’re in a correction and this is a buying opportunity. Even Warren Buffett joins the chorus of stock market cheerleaders for the skeptical public. Well, I agree with the skeptical public, not the experts here! The bull market from early 2009 into May 2015 looks just like every bubble in history, and I’m getting one sign after the next that we did indeed peak last May.”
Historically, bubbles have burst. The first example may be the Dutch tulip
bubble back in 1634-37. “This number is difficult to calculate,
but, we can tell you that at the peak of the market, a person could trade
a single tulip for an entire estate, and, at the bottom, one tulip was
the price of a common onion,” according to
More recently, www.media.morningstar.com/uk has shown us that the DJIA was off -89% from 1929-32, the NASDAQ was off about -78% in 2000-02, and Japan stocks lost -82% 1990-2008. “After trading in a steep, bubble-like channel from late 2011 into late 2014, with only 10% maximum draw down (market loss), the market finally lost its momentum. Notice this happened just as the Fed finished tapering its drug of choice, Quantitative Easing,” according to Harry Dent to subscribers on March 16, 2016. To some observers, including this one, the Fed was the primary driver in this stock bubble in the first place.
Recently it appears to me, corporate buybacks may have been the elixir for the stock market. The Wall Street Journal’s Steven Russolillo, put it this way on March 16, 2016,”The corporate buyback binge continues at full tilt. But, perhaps with good reason, investors may be losing faith in its ability to propel share prices. February, in particular, stood out, as cash-rich companies said they would continue rewarding shareholders rather than investing.”
You Have Been Here Before
Birinyi Associates Inc. in the same article submits we may have been here before. “For example, in booming 2007 when the last bull market peaked, buybacks totaled $761 billion. That plunged to $387 billion in 2008 and just $149 billion in 2009.”
As Jennifer Openshaw opinioned at CNBC on February 11, 2015, “But why is it that so many women are insecure when it comes to investing? Ranked at 127, “the Ventura County Star is one of the highest circulation newspapers in the USA,” according to www.mondotimes.com Let’s take a look at you, the VC Star readers. Thanks to www.echo-media.com, `Ventura County residents are among the greater Los Angeles areas “most affluent and sophisticated, with strong educational accomplishments, high incomes, and significant wealth.” Ventura County has the highest median household income in the area along with higher median home values. “Ventura County is the wealthiest market in Southern California.” For VC Star readers, “the average income is $95,000, the average age 35-64, and the percentage female is 59%.”
Maybe The Walk on Wall Street isn’t So Random
The study of demographic buying patterns begins here. When the average mom is 42, her average child is 14. Go back to middle school for a moment and you may recall that 14 is the age that your habit of eating potato chips peaked in demand. 42 is the age at which potato chip buying peaks, according to the US Census Bureau. Many of us have placed our focus on recent sales statistics. Rather than focus on sales to get a handle on what might me ahead, it may be far more valuable to look at the demand for purchasing various items based on age.
5 Item Check List
Each of us may either die too soon or live too long. From a financial stand point here’s what to do to help be prepared.
- When exploring life insurance options, consider factors beyond cost. First determine how much money each survivor needs so that loved one doesn’t die with the money. Using the 4% rule on withdrawal rates, for every $40,000 the survivor is accustomed to spend means there needs to be $1M of life insurance on the person who passed away prematurely. In a divorce situation where one spouse is getting spousal support and/or child support, the receiving spouse may consider ensuring there is sufficient life insurance on the paying spouse. Spouses often count retirement accounts as their money and it may be. But look in advance to see what the impact of income taxes might be. If you are under 59 ½ and you expect to start taking income you must review any tax consequences.
- Do not invest blindly. Do determine how much money you and your family need to make work optional. Let’s roundup the average household income in Thousand Oaks to $100,000. With the assumption you want to replicate 100% of that $100,000 annual income in one year, and assuming you set your withdrawal rate at 4% per year, it means putting $2,500,000 to work today. Don’t count the equity in the house as it is a use asset, much like a car or artwork. You live in the house so don’t count on it as an ATM machine.
- Don’t be complacent. What can you learn from past market declines? Look in the 2001-2010 time- frame for strategies you could have deployed that may have reduced downside participation. Ask the question, what’s the alternative? Consider diversification into multiple asset classes.
- Learn from the past. Rather than sit and take it the next time the grits hit the pan what can you see from the last time that may help you be better prepared?
- Don’t set it and forget it. If you don’t need the money account fluctuations may matter less to you. Since you will need income from your account at least review your goals and your statements as often as you plan your vacations
Men may often be wrong, but never in doubt. With women, however, there may be a confidence gap. No matter the gender, just as you have the courage to take the time necessary to plan your vacation, I know planning your financial success is a job you can undertake too. Start today.
The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute and endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.
There are no guarantees that any managed portfolio will meet its intended objective. Neither asset allocation nor diversification can ensure a profit or prevention of loss in times of declining values.
Indices are unmanaged measures of market condition. It is not possible to invest directly into an index. Past performance is no guarantee of future results. Examples used as illustration only, not indicative of any particular investment, actual results will vary.
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