High Yielding Returns: Why You Must Have Them in
Your Portfolio!
By Rachel Victoria, MSFS, former CFP
Oct. 2, 2008
30-40 years to Retire?
For decades Financial Planners, "Experts", and Brokers have told you it will take at least 30-40 years to build adequate retirement funds. "Be prudent, save, save, save, and wait, wait, wait." they urged. Well, that may be true if you follow traditional investment strategies. You have some years in your portfolio where the market goes down and you have losses, and you sit for a few years in a down market without any income, or growth in the portfolio. Basically, if you follow the traditional strategy (of "Buy and Hold") you will need 30-40 years to accumulate enough for retirement. Why? Because the overall average returns are so very low.
Why are the average return on my
investments so low?
Because you are losing a large portion of your principal every 5-7 years in down markets and you are sitting for years in down markets without any income or growth in the portfolio. You have wasted Time! And when you are trying to retire, you don't have Time to lose. That time is lost money for you, when you could have arrived at early retirement!
Let's look at the Dow Jones Industrial Average as an indicator for your portfolio. The last Stock Market Crash was in 1/15/2000 and lasted until 10/9/2002 which was often referred to as the Dot.com Crash. (We're not addressing the recent Financial Bailout Crisis Stock Market Crash, because we don't know yet when it will rebound).
The Total "down market" was 999 days (or 33 months, or 2.77 years.)
There was a total loss of 37.8%. The starting Dow Jones was 11,792.98, and the
Ending Dow Jones was 7,287.72. There was a total loss
of 37.8%. *Figures from 1stock1.com*
This is exactly why it is taking you 30-40 years to accumulate for retirement. You are losing time, income, and principal! Let's assume this happened twice in the last decade. (By the way, it has with the recent Financial Bailout Stock Market Crash). If you lose 37% of your portfolio twice in one decade and have no income or growth during the down markets (33 months), you have lost about 74% of your principal and had no income or growth for 66 months. No wonder, based on the last 8.5 years ending Sept. 22, 2008, your average annual return would have been -4.4 %. (This number goes even lower if you factor in an annual inflation rate of about 3% and potential taxes due on dividends and capital gains.)
It's fairly obvious why they say you need 30-40 years to accumulate for retirement with this traditional approach. As you can see, you can not afford to lose any Time and Money as you are accumulating for your retirement. Every Month Does Count!
What's the answer? It's simple. You need to focus on obtaining consistent High Yielding Returns to eliminate the need for a roller coaster 30-40 year retirement plan. When you are earning high returns monthly, you won't need to face years of "no growth", just hoping and waiting for the market to rebound. Also, with selected proven passive high returning income strategies, you can often achieve the growth in one month what it might normally take one year to achieve. Start today! Every day counts!
For more information on these
Selected, Guaranteed Services, please visit:
The author, Rachel Victoria, is a former CFP with an MSFS in
Financial Planning. Ms. Victoria owned an American Express Financial Services
Franchise for 20 years. Rachel currently enjoys researching, testing, and
writing about alternative Financial Income Strategies.
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