any of these might seem of formidable proportion, they like CDs, short-term bonds, and money markets,” rec-
probably are no worse than the concerns that bothered ommends Greg Womack, CFP, of Edmond, Okla.
investors in the 1970s, the 1980s, or any other period. MOAA offers a calculator that takes these factors into
In short, investing for a fi nancially healthy retirement consideration. Go to
www.moaa.org/calculators. Click on
still calls for the same kind of commonsense approach Investment Calculators and then Asset Allocator.
that has worked in the past:
Diversify your equity investments
Don’t try to time the market Make sure the portion of your portfolio you have invest-
“It’s better to invest regularly, without regard for the ed in equities is diversifi ed properly. Investing too much
general condition of the economy or the direction of the in a single industry or a single company will put you at the
stock market,” says Darrell J. Canby, president of Canby mercy of a serious downturn in that company or industry.
Financial Advisors in Natick, Mass. Mutual funds offer both diversifi ca-
“Timing the market — trying to de- tion and professional management.
termine the best time to buy specifi c
“Timing
“You may want to use ‘baskets’ of
stocks — rarely works,” he says. “You
might get lucky once in a while, but
the market
stocks in lieu of more volatile indi-
vidual holdings,” says Womack. “These
your luck isn’t likely to last.”
— trying to
baskets might consist of mutual funds,
Rick Willeford, a CPA and CFP
in Atlanta, says, “Market-timing and
determine the
exchanged-traded funds, closed-end
funds, and unit investment trusts.”
day-trading are for suckers.”
best time to
Select stocks or mutual funds only
on the basis of sound fundamentals.
buy specifi c
Rebalance your portfolio
at least once a year
Avoid reacting to daily
stocks —
After you have allocated your assets,
it’s important to rebalance them at
economic reports rarely works.” least once a year. As the price of equities
“In an effort to sell newspapers
— Darrell
goes up or down, the ratio you have
and air time, investors are trained established will change. If the value of
by the media to search for the next J. Canby your equities has risen, you might
economic number of the day,” says want to sell some to restore your origi-
Jordan Kimmel, managing director nal ratios. If their value has dropped,
of Magnet Investment Group, Randolph, N.J. “In reality, moving more cash into equities might be appropriate.
it is nonsensical to react to daily economic reports. No “If your portfolio is within an IRA or other retire-
investment strategy is better than identifying superior ment plan, consider rebalancing every quarter,” Wom-
companies and holding them while letting your money ack says. “If it is in a taxable account, rebalance at
compound over time.” least annually, perhaps more [often] during extremely
volatile periods. For [a] rebalancing strategy to work,
Maintain an appropriate asset allocation you must own assets that don’t react the same way over
All fi nancial advisors agree it is critical to maintain an differing market conditions.”
asset allocation suitable to your personal circumstances.
Asset allocation refers to the process of dividing your in- Stay the course
vestable assets among stocks, bonds, and cash. “Creating a plan and sticking with it under all market con-
The mix that is right for you will depend on factors ditions is the way to maximize your returns,” Kimmel says.
such as your age and your risk tolerance. If retirement is One helpful technique is called dollar-cost averaging —
years away, most experts recommend relatively heavy putting the same amount of money into equities or mutual
investments in equities, perhaps 60 percent or more of funds at regular intervals, regardless of swings in the mar-
your total portfolio. “However, if your [retirement] time ket. This way, when prices are higher, you are buying fewer
horizon is less than three years, stay in fi xed investments shares; when prices are lower, you are buying more shares.
There is, of course, much more to the maintenance
RESOURCES
of a retirement portfolio suited to promoting a good
night’s sleep during these times. Sticking with these
■ For more investment resources, visit MOAA’s online Financial
Center at
www.moaa.org/financial.
commonsense fundamentals will go a long way toward
achieving that end. MO
68 MILITARY OFFICER AUGUST 2008
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