Over the past week, we’ve gotten calls from long-time clients who are asking us what sounds like a reasonable question: “Why are we not putting ALL my money in these growth stocks that keep going up?” As we said, it SOUNDS like a good plan, but it’s based on a wrong understanding of how the market works. When stocks are high — and most of the stocks in the current growth stocks are so high they are overvalued — you don’t want to buy them. Buy low and sell high is the motto of savvy investors.
Ryan likens the markets over these past two weeks to a massive casino. Traders have been basing their trades on the most recent happenings in the market — tech stocks that keep going up — so they try to ride that train even further. But this week, the train hit the brakes a bit. Is it the beginning of the end?
You will want to hear this episode if you are interested in…
- Finally, some tech sell-offs — and the question on everyone’s minds [0:33]
- The “smart money” is positioning in cheaper asset classes, not what’s hot [5:30]
- And the economy keeps getting better [7:55]
- Two fundamental things when it comes to income plans [10:26]
- Why your portfolio should be based on your goals and a diversified strategy [16:27]
- The random facts of finance that may shock you [18:03]
The tech bubble could be popping, or is it just a correction?
As we began to see sell-offs of tech stocks this past week, everyone began asking the question: “Is this it? Is the tech bubble about to burst?” We tend to think it’s the beginning of the end because stocks that go up when the sales of the company haven’t gone up are risky at best. The growth we’ve seen in these stocks is superficial, driven by speculation, not sound investment strategy. It’s only a matter of time before it’s over — and it looks like it could very well be over.
Economists are batting 1000 — and all wrong
We’ve all got that friend or relative who continually sees the glass half empty. There are lots of reasons some people see the world through a negative lens, but one thing Bob has always said is that many people think they sound smarter when they talk negatively or critically about things. Economists these days seem to be in that boat. All they can say about the economy is skeptical, but the reality is that we’re much better off than anyone predicted and it just keeps getting better.
In every dark cloud, there are silver linings and in the current situation, you can take advantage of what’s happening in the economy to profit from it. But you have to take your eyes off the glitzy, fancy-looking things out there and instead, look at the common sense things that are happening and invest in them. In this conversation, we chat about some of those and give tangible examples of how the smart money is going in this direction.
Your income plan needs to have clearly defined income streams
Do you even know the different types of income that fuel your lifestyle? There are likely more types of income than you think. First, and the one most of us think of, is wages or earned income. But there is also Social Security and pensions, rental income, annuities, and interest and dividends earned on stock holdings. You want to build your retirement portfolio for income because income is what will matter most to you during retirement.
But as you do so, do it in a diversified manner. You don’t want to overweight any one investment. That can bring on sudden losses that are devastating. What you need to keep in mind is that even when the market is down, interest and dividends don’t really change that much. That means interest and dividends can easily be the biggest part of your return, long term. The secret to investing is that if you own investments that pay income, and if you don’t spend that income, it gets reinvested to buy more shares for your portfolio. That is sustainable, dependable, repeatable income — and it’s smart. Listen to hear more about how you can make it happen.
Resources & People Mentioned
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