I’M WRITING this just before 6 a.m., following a few days during which world stock markets caught their own version of the flu. Frankly, I can’t sleep thinking about what’s happened—and especially about the investors who panicked and locked in their losses, just like so many folks did in late 2008 and early 2009.
It took me a few minutes to muster the courage to look at my 401(k). When I did, there was no shock: Yes, my balance had dropped. Then I checked the difference from Jan. 1. It’s hardly changed. Perhaps I’ll sleep tonight.
My good fortune—so to speak—resulted from my mix of 40% stock funds and 60% bond funds. I’m 76 years old and have been retired 10 years, but I don’t rely on my 401(k) for income, because I have a pension, as well as Social Security. I like growth, but I dislike going backwards even more. Hey, this diversification thing seems to work.
My 401(k) is less than half my investment funds. The rest includes a few stock mutual funds, two utility stocks and some municipal bond funds. An expert looking at my investment choices might have a “what is he thinking?” moment. I’ll admit to running on instinct. Still, my seat-of-the-pants strategy has allowed my 401(k) to grow by more than 50% since I retired, even after those darn required minimum distributions.
Could I have done better? Perhaps. But I could also have done far worse.
Few retirees these days are in the desirable position of living on a pension and Social Security. Likewise, not many people would follow my investment strategy, nor should they. When it comes to investing, especially the retirement kind, we’re all unique. The guidelines for investing that use things like age and years to retirement are fine, but they don’t consider the illogical factors that influence all of us. I once blindly followed professional advice, and my wife and I ended up with some deferred annuities that I still don’t fully understand.
That said, I believe most people could benefit from some professional guidance. But you need an advisor who understands you—and you need to understand yourself:
Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Brain Meets Money, Count the Noncash and It’s a Stretch. Follow Dick on Twitter @QuinnsComments.