The Right Thing is Often the Hardest Thing

It has been a great couple of months for us in the investment business. Some time had passed since we could talk about increases in account values and had clients eager to put more money in the market. While this is great for business, the actual change of pace holds a much greater meaning.

Since late 2007, the changes people have felt in their wallets and investment accounts parallel the changes in their psyche. Constant horrific economic news, political uncertainty, and continually dropping portfolio values moved many people to a place where their actions became as erratic as the stock market. Consider the ramifications of this one simple question asked by many investors:

“Since my cash flow is so tight, why should I continue to contribute to my 401(k) in these challenging times?”

1) Consider that each dollar not put into a pre-tax retirement plan is subject to federal and state taxes. A dollar saved in a retirement plan is a dollar earned, a dollar saved outside a retirement plan may only be 80, or even 60 cents earned depending on your income level. I’d rather take my chances with the market than lose 20% to Uncle Sam right from the start.

2) Many companies out there are still contributing some kind of match toward their employees’ retirement savings. Often this is done dollar per dollar up to some level. Let me be clear here, “THAT IS A 100% IMMEDIATE RETURN ON YOUR DOLLAR!” You can even afford to have a little credit card debt if your contributions are being matched. Put in at least up to the matching threshold, where the market can take 50% and still leave you with what you started with.

3) When we have recessions, stocks go down. When we have expansions, stocks go up. This is the perfect time to invest, you are buying low so you can eventually sell high. When news of the recession ending leaks, so does the return potential. Get in early and your bravery to test the tepid waters is likely to be rewarded.

Having a grounded financial plan and investment strategy will help answer the question above. Emotional decisions are often made with haste and are not always the most pertinent. When a map has been drawn, it is quicker and easier to find a destination. This also stands true for our financial wellbeing. By sticking to the plan and monitoring the success of lives, not investment accounts, people are weathering this turn down by buying low and saving more. The reward of this will ultimately be reaped in the future.

Our goal at Mackey Advisors™ is to position our clients to have an incredible life regardless of their asset level. It has been demonstrated that stock markets are not a must have for prosperity and happiness. Although it sure is nice to see signs of life in the market once more.

by Andy Pulsfort