Retirement Fund – Where Are You When I Need You?

Right now many Baby Boomers might well be lamenting a large loss in the retirement fund. Many like Paul Escobar may have done all the right things and saved for their retirement, only to lose much of their nest egg and their job as well.

“As of today, no surprise, he’s lost 45 percent of his balance — and he’s lost his job, too. In hopes of recovering losses, “I’ve definitely been rebalancing my allocations,” says the 42-year-old.” Does America need a new retirement system?

You may have also taken the advice of many financial planners and put a large portion of your retirement funds into risky equities. You believed your financial planners when they said you had to have a large portion of you funds in risky equities or you just would not get the returns on your fund necessary for you to retire comfortably.

Using the standard marketing ploy of the stock market always goes up in the long term they convinced millions of Baby Boomers to set and forget their nest egg.

As we all know a nest egg needs to be nurtured and watched and protected. Just ask a penguin – even they know this. None of this was done and it was left to the vultures of the financial markets to risk all your hard earned money to line their own pockets.

They knew something you didn’t. If they got into financial trouble the government would bail them out even if it meant you lost all your money. So what had they got to lose?

Citibank was bailed out after it got into financial difficulty several times. So the die was caste back then.

Where are your retirement funds? Well, perhaps 30-50% has gone. I do not subscribe to the view that it will come back if you hang on. It’s gone. If the market recovers you have lost 30-50% of the nest egg that could have been used to increase your returns if you had exited the market when it was going down. All you can hope for now is to recover your losses not increase your nest egg.

I don’t subscribe to the theory that is easier said than done to exit the market either. By proper use of stop loss strategies you can protect much of your nest egg. Even with Mutual Funds written instructions can be provided in a strategy that requires your financial planner to redeem your funds under certain conditions. That’s keep them awake at night!

It’s called “taking care of your client and protect their nest egg”. It’s not actually taught anywhere. Some financial planners learn this themselves and if you can find one stick to them like glue.

The way things are moving in the stock market right now though it may be possible to recover much of your nest egg just because there is so much money with so few places to go. Also most fund managers will go back to doing what they did before the crash.

The stock market has a psychological affect on a nation and can create confidence out of thin air. Just look at the rally going on now – “green shoots appearing”. We’ll all be dancing around the May pole soon. Maybe they are weeds though? 10 of 19 big US banks may need more capital. Bernanke says about $10Bn each but the IMF says about $500Bn between them. Maybe someone is smoking the weeds?

It doesn’t matter who’s right. It matters only that the stock market keeps going up defying the economy slow down and the unemployment increases.  Because that is the only way you will get your nest egg back quickly. With luck it will retrace to about 10,000 which might be a good point to take some money out.

There might be a tipping point here where the fear of missing a new bull market will overcome the fear of losing more money. If that happens the tsunami of money supposedly on the sideline will flood the stock market and sent it rocketing up.

The difference between 1929 and now is computerised trading. Today in a second, billions of dollars can enter the market. What was it I read, there is over $8 Trillion on the sidelines looking for a home. That’ll take a few seconds to enter the markets I expect 😉

“Institutions dipped their toes in the shallow end . According to the latest investment manager survey by Northern Trust, money managers moved cash off the sidelines, clearly a bullish sign. There’s still about $8 trillion waiting to do the same, which is plenty to fuel a sustained rally.” “A New Bull Market or a Bear Market Rally”

This is the quiet time before the Obama regulatory storm that is sure to make it much harder to make money.

With the markets being down so much the justification you’ll be given is stocks are cheap. It doesn’t matter that you are paying 10%-20% more than yesterday when the stock is down 50% from its peak they will tell you.

Then if there is a pull-back even more money will be thrown in and underpin the market. Buy the dip, buy the dip they will say. If confidence holds up long enough the market may actually fly.

Under such irrationality nothing could stop it. Just as it made no sense for some companies to suffer large losses during this bear market, banks and other institutions may well have massive increases in their stock price – for no rational reason.

Forget about mark to market, CDO write-downs and stress tests and all that lying and cheating. It’s all about talking the markets up and so being a bear may well put you on the wrong side of the market.

It’s the weight on the money that will move the market. Right now it seems it wants to move into the markets. The institutional investors are stirring, so watch out.

Their “fear of missing out” is your best option to getting your nest egg back or at least a good portion of it.

So watch and wait. If the market get’s back to around 10,000 really do consider taking half your funds out of equities and property and put it in a safe bank deposit until things become more clearer. Then consider using a stop loss verbal or mechanical to protect the rest of your nest egg.

Then be prepared to take what the market gives you good or bad.

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