Baby Boomers Nest Egg – Where to from here?

I have been taking a few days out to think about what to do now with the blog.

I cannot keep talking about all the doom and gloom. The blog was meant to help inform Baby Boomers of the need to protect their nest eggs and take control of it.

Events moved so fast that most Baby Boomers didn’t get a chance to even get their heads around the problems I was talking about.

The whole wealth management system was based on the false assumption that markets will always go up. When they don’t they will soon recover and continue going up. Their models took no account of the the potential for a major catastrophe that could bring down the stock markets, the mortgage markets, the credit markets and destroy world economies too.

Hind-sight tells us Wall Street had stopped investing in Stocks long ago because there was no serious money to be made there. Pension funds were churning stocks to pay themselves hefty fees and commission at the expense of their investors. The smart Wall Street guys knew this and so set up their own money making system

They set up their own off market trading system dealing in complex derivatives, then packaged them and on-sold them to unsuspecting but trusting private clients, pension funds and local government institutions around the world.

The two thing all these people and organisations had in common was virtually no financial experience even at board level, an eye for an easy buck with an implicit US government guarantee, and a reliance on the advice given them by the Wall Street sales people. Add a ratings agency triple A rating and it was a money making machine for Wall Street.

Unfortunately many Baby Boomers are now stuck with investments that show significant paper losses. Many had all their retirement nest egg invested in “properly diversified and asset allocated” balanced pension funds.

Most of these funds only had one fire door Baby Boomers could use to get out if things went bad – the redemption door. The whole idea of buy and hold is no exit strategy was needed – ever. There was no plan B, no what if scenario that was designed to gracefully reduce a Baby Boomers exposure to the volatile markets.

I’ve been reading that redemptions from funds are at their highest level in years. That probably includes Baby Boomers who are getting out at whatever the financial cost is just so they can sleep at night.

So much for faith in the financial system and their financial advisers.

Where to from here? Baby Boomers who still have money invested in funds showing a large paper loss should seriously try to hold on if they can. The financial loss is just too much to take right now. If possible try and live off the cash you have before selling depressed assets.

If you are still working then you might consider putting any spare money into the bank until further notice. That will ease the pain of the losses since you will have money to live on.

Where to from here for this blog? I am still deciding what I should do. Harping on all the negative stuff is not the thing to do. If I find a topic which is positive I will post about it.

I am now considering giving myself a refresher on trading/investing in the markets. There will be some good opportunities coming up once the volatility settles down. I want to make sure I have a trading/investing strategy in place to take advantage of any market rally in the next 12 months or so.

However I don’t expect the markets to rally and get back to where they were for some time to come. High leverage investing which drove much of the bull market is no more, at least for a while.

If I were to give any advice at this point it would be to learn all you can about protecting your nest egg for the future. Learn also how stock markets work and how you might be able to take advantage of any market rally in the future with a percentage of your money.

Also try to diversify so all your nest egg is not with one fund manager or financial planner or WRAP account. Give yourself plenty of wriggle room. Don’t trust anyone who claims to be a financial expert. You keep control of your money. Keep enough cash handy for 3-5 years if you can.

2 Responses to “Baby Boomers Nest Egg – Where to from here?”

  1. Martin White says:

    Very good comments and advice

  2. admin says:

    Martin,

    Thanks for your comment and support.

    I will try and find positive things to post about for the future.

    David

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