Many of you probably have glanced at my predictions for 2009.  Most likely, some of them will come true while others will not which is why I don’t place big investments on predictions alone.  Instead, I continue to advocate making well thought out decisions.  Following are 9 points of advice to help you make good decisions in the year ahead: 

1.                  Take a deep breath.  Let’s face it, 2008 was horrible and there was really no place to hide.  No one can say for sure, but there could very well be some days/weeks during 2009 that feel similar to the last quarter of 2008.  But ultimately, I believe the market will be 10-15% higher by the end of 2009.

2.                  Pay attention.  Many friends and others have told me that they haven’t even looked at their statements since October.  As a planner who relies on giving advice based on all the data, hearing such comments makes me cringe.  Take a look under the hood to see if anything needs to be repaired, or if any parts need to be replaced. 

3.                  Diversify.  I have heard pundits say that diversification failed investors in 2008.  While I understand the gist of the comment, I don’t agree with it.  Had one invested mostly in financials, the damage could’ve been a lot worse; or had one ramped up exposure to energy stocks in May-June, the damage could’ve been much worse.  While the system failure made diversification much less attractive than owning cash, diversification still worked with regard to benchmark comparisons.  It is important to note that because of the many asset class dislocations in Q4 2008 and ensuing economic slowdown, a diversified portfolio looks much different than it did just a few months ago…but diversification does work (assuming you prefer to avoid train wrecks and can enjoy life without hitting home runs).

4.                  Use the right measuring stick.  It could be especially difficult after 2008 to make investment decisions with a 2-5 year time frame, but it is very important nonetheless.  Otherwise, the fatigue from a rough 2008 could encourage investors to assume that 2009 will be similar to 2008.  There may be some gut wrenching moments in the new calendar year, but barring an outright depression, most of the long term damage has been done to the financial markets. 

5.                  Be nimble.  While volatility was basically absent during December, it could return during parts of 2009.  Use big swings to either increase or decrease exposure to asset classes that become oversold or overbought.

6.                  Think outside the box.  The old rules of diversification don’t work as well as they used to.  When the time and circumstances are right, include other asset classes such as non traded real estate, commodities, high yield fixed income instruments, etc.

7.                  Delay retirement or go back to work.  There is no candy coating here.  These have been tough times, and there will surely be some more tough times.  Obviously not everyone needs to heed this advice but if your retirement security is hinging on a goldilocks economy and stock market where everything is "just right", you are taking a big risk.  If already retired and going back to work is not an option, then cut back on expenses to avoid draining your portfolio too early.

8.                  Plan before making big decisions.  Undergo a thorough retirement needs analysis before turning in your retirement paperwork, or talk with your financial advisor/CPA before making large purchases.

9.                  Did I mention take a deep breath?  Refer back to 1.     

< back to articles