This is the first of a recurring column from Merrill Lynch wealth management advisors David Menashe and Bruce Morley, who have both worked in Rancho Santa Fe for more than 28 years.
Low interest rates and losses in real estate and equities over the past few years have led many investors to work longer and save more to replenish retirement funds. But these actions may not be enough to fund those golden years, especially for aging Baby Boomers. While the stock market has experienced its own fluctuations, it offers opportunities for steady income and potential growth.
According to the Bank of America Merrill Lynch U.S. Equity Strategy “How to Retire on Stocks,” corporate balance sheets are strong, with shares of the 100 largest companies in the United States having outperformed most major indices thus far in 2012, and substantial dividends from large corporations having moved steadily higher. Of course, past performance is no guarantee of future results. Also, dividend payments are not guaranteed, and the amount of a dividend payment, if any, can vary over time. However, here are a few tips for strategically investing in stocks:
- Invest According To Goals: It’s essential to look beyond benchmark indices. Rather, consider investing according to goals and priorities with different time horizons and risk tolerances to achieve objectives.
- Engage Actively: Today’s market volatility requires more engagement with the changing markets, so think about diversifying and rebalancing portfolios more often — from once a year to two times or even quarterly. Keep in mind that diversification does not protect against a loss in a declining market. Also, rebalancing your portfolio can trigger a tax event.
It’s important for investors to save for retirement early and have a strategy, but they don’t have to do it alone. Working regularly with a trusted financial advisor can help make sure they’re on track to reaching their retirement goals.