New Year. New You. New Nest Egg.
By Natalie Pace,
Author of Put Your Money Where Your Heart Is: Investment Strategies
for Lifetime Wealth
Build a better nest egg with 6 easy, sound strategies.
The stock market lost 38% in 2008, but if you lost more than 20%, your
problem wasn't really the stock market, it was the design of your nest
egg. Storms occur in markets, as they do in the real world, but your
home shouldn't be flooding every time it happens.
You know intuitively that your retirement plan doesn't work. Your
nest egg has drowned twice now in the last eight years. You were
elated with your returns in 1999 and then devastated when your assets
imploded during the DOT COM bust of 2000-2002. Same thing when Dow
Jones Industrial Average broke through 14,000 in October of 2007, only
to drop below 8000 in 2008. If you had a healthy fiscal plan, your
nest egg wouldn't be sinking all of the time.
And contrary to what your financial advisor may be telling you, the
markets returned only 4% over the last ten years, not 12%. That was
less than a percentage point above Treasury Bills, at 3.3% annual
gains, with a whole lot more risk.
Sound Nest Egg Strategies:
Rule #1: Always keep a percent equal to your age.
Modern Portfolio Theory, the cornerstone of a healthy nest egg, has
been around for half a century and Harry Markowitz, the economist who
wrote it, won a Nobel Prize in 1990. Many financial professionals are
paid on commission to sell you mutual funds, so, if you weren't
protected from the 2008 financial crisis, chances are that either 1)
your guru just didn't know the theory, or 2) s/he wasn't paid to
employ the theory, or 3) s/he had bosses who pushed sales hard and
couldn't employ the theory, or 4) s/he was dumb enough to think s/he
could outthink a genius Nobel Laureate.
Grade Your Guru:
- You wouldn't hire an architect whose buildings flood in a storm.
Since there are so many ìprofessionalsî and ìpunditsî who are spouting
off -- when in reality they drowned their clients' nest eggs in 2008
-- it's your job to take charge and design a better dream life. As TD AMERITRADE Chairman Joe Moglia says, "Nobody cares more about your
money more than you do."
- Bears get lucky in bear markets. Bulls get lucky in bull markets. Sound nest egg strategies work in any market!
How To Grade Your Guru:
- Add up your losses. If you lost more than 20% in 2008, your guru
isn't making the grade.
- Check your allocation. If you didn't start 2008 with a percent
equal to your age SAFE in Treasury Bills and/or high-rated bonds (GM,
Fannie, etc. DO NOT QUALIFY), your guru isn't looking out for your
The pie charts and strategies outlined in Put Your Money Where Your
Heart Is saved Bill (a handyman) and Nilo (an office administrator)
Bolden's nest egg, while Nilo's bosses lost hundreds of thousands of
dollars. Since employing my strategies, they haven't lost anything.
Before I give you the details on my track record this year, which was
outstanding, please note that novices have no business trading
individual stocks in this financial storm anymore than beginning
surfers should race into the jaws of a tsunami. Don't trade
individual companies in 2009 unless: 1) you know how to buy put
options and have had a few years of successful trading long and short,
and 2) are willing to take your profits early and often. Obviously,
if you don't know what I'm talking about, you need to focus on sound
nest egg strategies first and education second -- perhaps at my Get
Rich and Enrich Retreat. (Check out the banner ad on the home page at
NataliePace.com for more details.)
70% of the companies I featured in my 2008 monthly article and stock
report cards were winners. Of those winners, more than half (58%)
were shorts, i.e., companies that we expected to go DOWN in value.
ACT NOW TO GET IN GREAT FISCAL SHAPE!
Blind faith lost you a lot of money in 2008. 2009 is poised to be
another stormy environment in stocks, which means that if you don't
pull your head out of the sand and get a better dream life plan,
you're going to be get buried.
My Golden Nest Egg Formula
- ALWAYS KEEP A PERCENT EQUAL TO YOUR AGE SAFE. Treasury bills are
the safest investment today. (High-rated bonds, money markets and CDs
are traditionally and will be again in the future.)
- DURING RECESSIONS, OVERWEIGHT 15-20% ADDITIONAL INTO SAFETY. Cash
is King in a recession, i.e. not losing is winning. You will not be
stuck overweighted in cash forever. If the markets continue to drop in
2009, as they are poised to do, you'll be glad you employed this
defensive strategy. And you will have cash to invest, while those
around you are scrambling to hang on and/or are forced to sell low to
cover basic needs.
- REMAINDER IN YOUR NEST EGG SHOULD BE DIVERSIFIED INTO 10 ETFS. You
will find detailed pie charts in Put Your Money Where Your Heart Is.
- EMERGING INDUSTRIES, NOT DYING COMPANIES. General Motors and Ford
Motor Company combined are worth less than one-tenth of Toyota Motor
Company's $102 billion. It is not just that Ford and GM have more
expenses. GM and Ford lost market share this decade because their gas
guzzlers were far less popular than the fuel-efficient Prius and other
- KNOW WHAT YOU OWN, i.e., not mutual funds. The top mutual fund
holdings in the U.S. in 2007 included some of the most poorly run
companies, including General Motors, AIG, Fannie Mae and Phillip
Morris Tobacco Company. ETFs allow you to target sections of the
stock market by size (small, medium and large), style (value and
growth), industry (gold mining, clean technology, international,
biotechnology, etc.) and more.
- DON'T TRADE. If you don't know how to take your profits early and
often and/or if you don't know how to buy put options, do not buy and
sell individual companies at all in 2009. (Own companies you love in
ETFs where you are more protected from the price fluctuations of any
one individual company.)
If you used this 6-step formula and rebalanced only once a year (say
in January), you could have captured your gains in 2000 at the NASDAQ high. Likewise, in January of 2008, you would have captured your Dow
Jones Industrial Average gains before the major fall-off and
redistributed. Identifying where your gains are coming from allows you
to increase your assets and redeploy your holdings back into a sound,
dream life blueprint – which is a combination of Modern Portfolio
Theory, ETFs, common sense and basic investing recipes.
These strategies and more are outlined in my book, Put Your Money
Where Your Heart Is. Buy it now as part of your New Year; New You;
New Dream Life! And be sure to forward this article to a dozen of
your closest friends, family, clients and co-workers who need to get
Natalie Pace, author of Put Your Money Where Your Heart Is (Published
by Vanguard Press; 978-159315-491-2), is adding a splash of green to
Wall Street and transforming lives on Main Street. She is the founder
and CEO of one of the most respected independently owned financial
news organizations in the world. She has been ranked as a #1 stock
picker from TipsTraders.com and has partnered with Forbes.com. She has
repeat guest appearances on Fox News, Good Morning America, Time
Magazine, More Magazine, USA Today, NPR and Kiplinger's Personal
Finance. She currently lives in Southern California. For more
information please visit, http://www.nataliepace.com/