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Over the years, I have tried to educate and inform our readers as to insights that I have learned over the years as far as retirement strategies, investments, risk management and other topics in order to help folks enjoy a happy, secure and fulfilling retirement.
I normally do not try to “predict” or suggest specific market conditions or investments in my blog or podcast as everyone’s situation is different and a specific recommendation in those writings might not be appropriate for every reader and listener.
Nobody is Right All the Time
Despite this policy, I will talk about risks or situations that appear and might cause someone to lose money due to a market reaction.
For example, these days I am strongly encouraging folks to avoid bond funds and high yield (aka; Junk Bonds) bonds in general. This is due to the increasing interest rates which we are currently experiencing.
When interest rates go up, the value of bonds goes down. So far this year the average return for investment grade Corporate Bonds is more than a negative 12% (according to Marketwatch.com). Since most investors add bonds to their portfolio in hopes of reducing volatility and protecting against losses, we can clearly see that that isn’t helping during our current conditions.
In a future post, I will offer some suggestions for alternatives to bonds and bond funds, but for today, you might want to consider something other than bonds to reduce risk in a portfolio.
What’s Happening Right Now in Stocks and Bonds
The scenario that is playing out right now in stocks and bonds is something that I spoke about last fall. In a “Retire Happy Money Minute” video I talked about how the Federal reserve was going to “taper” their support for the bond and stock market.
I mentioned how this would spur increases in interest rates and put pressure on stocks. Earlier last year, I recommended that investors look to reduce their risk exposure.
Both of these suggestions were posted on our YouTube channel, Gainer Financial and Insurance Services.
Since we only send out our newsletter on a monthly basis for the most part, I wanted a way to communicate with our readers when something was happening that they might not have known about but could have a big impact on their wealth.
That is why we try to post weekly updates on the channel.
![\"I](\"https://gainerfinancial.com/wp-content/uploads/2022/05/I-Wasnt-Right-About-This.png\")
I Wasn’t Right About This
So, everyone brags about when they are right, but nobody is right all the time.
Back in September of 2019, I wrote a blog post called, “Is the Reward Worth the Risk?” In it I suggested that according to many respected analysts, we were entering a recession, and it was time to lower one’s risk exposure.
However, by March of 2020, a few short months later, the market had history’s shortest bear market and by April, stimulus was flowing, and stocks not only recovered, but went on to set record after record during the next year and a half.
I Was Very Wrong
Obviously, I was very wrong (or some would say early) based on what happened over the next couple of years but consider what might have happened if there was no Covid or lockdown or stimulus.
The rally to new highs might not have happened.
What I want readers to understand is that I am a huge proponent of Warren Buffet’s 2 rules of investing; #1-Don’t lose money. #2, never forget rule #1!
The math bears this out, it is more important to avoid big losses than to catch the big runs and then ride them back down.
What I am trying to say is that investing is about what is going to happen in the future, not what has happened in the past.
That is why all financial services commercials end with “investing involves risk, past performance is no guarantee of future results”.
If I was going to make a mistake, I would prefer to err on the side of caution, as losses are harder and harder to overcome, especially if you are near or in retirement.
You’ve Got to Learn From History
Considering the above, I want to also remind readers that it is important to learn from history, so that we can have some idea of what can go wrong and prepare. Our current environment of rising interest rates and inflation are very similar to the 70’s and early 80’s when we had a very difficult bear market for stocks and the experience of “stagflation”.
Whether or not that will repeat isn’t what is important.
The fact that if this were to repeat, many folks will have their retirement dreams and aspirations disappear, so make adjustments to prepare to avoid the worst-case scenarios.
There are always opportunities.
No set of economic conditions are bad for everyone or all investment options. Looking into the future and identifying strategies that will still be effective if we were to experience stagflation, recession or other negative economic periods is what I want to encourage you to do now.
We are always here to help you navigate toward your personal happy retirement.
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