Photo by Corinne Nicholson
Some of the questions that are often asked when I appear on the Fox Business Network or on local TV are: Why is the market moving up and down in big swings? Are we heading for a double dip recession and another crash in the market? Should I be invested in the market or jump out again?
These are logical questions and whether the answer is yes or no, there is convincing economic data to argue either way.
For the optimists, right now we are seeing record-breaking earning reports from companies like Intel, J.P. Morgan and many others that tightened their belts in 2008 and 2009. Many of these companies stashed large amounts of cash in the company coffers. In the news, I have seen numbers as large as $1.8 trillion collectively.
Other economic indicators suggest that more company mergers could be on the rise. The market had one of the largest rebounds in 2009 and those who turned to cash in 2008 locked in their losses, but also missed the upswing that lasted through March.
On the other hand, how can you argue with the pessimist that has a strong argument when they say, how can you invest in the market when there is 9.5 percent unemployment, or the Obama administration is going to raise taxes that hurts small businesses and many of the new jobs we need for an economic recovery come from small businesses.
These are both valid points, but at the heart of all debates, all investors are worried about their retirement plans, portfolios and how to best achieve predictable results for the future.
For many of my clients who are retired or soon to be retired, we develop strategies that don't abandon the market and its potential gains, but offer a layer of protection for large market downturns. This has been the key difference in having peace of mind vs. sleepless nights. One factor that some investors seem to forget is that today with longer life spans most periods of retirement can last anywhere from 20 to 25 years.
For investors nearing this stage in life and for our younger investors, it is so important today that they invest with their minds, not necessarily their hearts. What I mean is there are academic and process-oriented ways of maximizing the way you invest your money -- without emotion. As another tool, our firm emphasizes customer education. As part of this commitment to education, we have created a list of the "20 Must Answer Questions For Your Journey Toward Peace of Mind" to help investors. We feel these questions can help start the process of clarifying future financial goals -- despite today's murky economic outlook.
Examples of these necessary questions include:
* Have you discovered your true purpose for money that is more important than the money itself?
* Do you have a general understanding of how the markets work?
* Have you defined your personal investment philosophy?
* Have you identified your personal risk tolerance?
* When it comes to building your investment portfolio, do you know exactly what you are doing and why?
* Do you fully understand the implications and application of diversification in your portfolio?
* Do you have a system to measure portfolio volatility?
* Do you know the three warning signs that you are gambling and speculating with your money vs. prudently investing it?
This is a sampling of some of the thought provoking questions that we want our investors to answer (with our help) through education.
If you can become a better educated and smarter investor, you can best equip yourself with the tools necessary to make informed decisions and overcome the ups and downs of the market, while more importantly being on your way to a high level of peace of mind investing. With the uncertainty of today's economic climate, this is the only answer that is for certain.
Mark Lloyd is the founder of The Lloyd Group Inc. His website is www.thelloydgroupinc.com.