Want to Know How The Subprime Mess Destroyed Your Nest Egg?

Wharton University of Pennsylvania have put together a fantastic presentation dedicated to explaining the sub prime crisis and what needs to be done to fix it.

There are 7 videos you can watch that explain the various stages and compare it to Japan.

There is an Interactive Special Report on the Sub Prime Crisis, The domino effect from the housing bubble and a glossary of all the terms to do with sub prime.

It is something all Baby Boomers should study as it will make you more financially aware. Plus you will understand why you must take control of your nest egg and not leave it up to your financial planner or adviser to protect it for you.

If you have lost money in this crisis plan to ensure it doesn’t happen again or at least find ways to minimize any losses.

Wealth Managers have used the last 25 years of long term returns to justify a buy and hold philosophy for your nest egg. They told you that you should expect some volatility every 5-7 years but that the market would recover.

The problem is whilst they told you to expect the market to fall every 5-7 years they didn’t tell you how far it might fall. It’s not the fall that is important. It is how far it falls.

This is especially so if you are in retirement and using your nest egg to draw a pension. The market can fall so far that if you continue to take a pension from your nest egg, it will not recover.

This is not mentioned in the small print. They just tell you that past performance is no indication of future performance.

Wharton University explain how lawmakers, lenders, borrowers and Wall Street all helped bring on the crisis.

2 Responses to “Want to Know How The Subprime Mess Destroyed Your Nest Egg?”

  1. Charles Brownell says:

    What’s even worse for the retired couple is the urge to sell at the bottom. They are looking at their nest egg fall further and further and fearing that they’ll have nothing left they sell. In that case they’ll never see their portfolio recover.

  2. admin says:

    Hi Charles,

    Thank you for your comment and support for this blog.

    Unfortunately you are right. The markets have fallen over 40% and since most Baby Boomers are fully invested with 50-70% in Equities there are large paper losses right now.

    For those Baby Boomers in retirement and fully invested it makes sense to consider selling fixed interest and other assets first to get cash to live on.

    Those that are fully invested in equity funds or mortgage funds may be forced to sell part of their portfolio to live.

    Those that cannot redeem any of their nest egg from managed funds may be forced to stay at work, go back to work, seek social security or pensions from government sources.

    This only goes to show the incredibly poor job the financial world has done with Baby Boomers assets and the failure of governments to regulate them to ensure Baby Boomers are protected against large losses in retirement.

    David Bates

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