The Struggling 2000's

About 10 years ago, I remember a book came out by Harry Dent titled the Roaring 2000's. In it he predicted this new century was poised for tremendous growth, and he made some very bold market predictions like the Dow at 40,000. I believe he has since changed his tune a bit perhaps based on what has actually occurred in this first decade of the twenty first century.

A lot of negative things have happened this past decade with two major bear markets taking place. Stocks on the New York Stock Exchange have lost an average of 0.5% annually since the beginning of 2000. Compare that to an average 17.6% annual gain stocks achieved in the 1990's.

Where does that leave us today? How should you as a Baby Boomer invest in such uncertain times? Well if you study other assets during this same period you will see that not all of them fared the same as stocks. Bonds yielded between 5.6% to 8% depending upon the sector you were in. Gold outperformed everything else - up 15% annually this decade after losing 3% annually in the 1990's.

I believe everything is cyclical in nature and these trends will most likely continue. Some years stocks will do well while other years bonds may outperform. As someone nearing retirement, you have to be able to build a portfolio that will withstand the downs of the market. The best way to do this is to build a very well diversified portfolio that includes both stocks and bonds. Adding additional assets such as gold and other commodities to the portfolio makes a lot of sense as well. Look for traditional companies that continue to pay a healthy dividend to add to the mix. Lastly, pay attention to asset valuations and adjust your portfolio accordingly.

Make sure you have a strategy in place so when you do retire, your future retirement years will be insulated from the wild swings in the market. Let's hope 2010-2019 becomes the Roaring 2000's again!

Happy Holidays,

Carleton