How to Invest for Retirement After the Crash of 2008

De: Dale C. Maley

Narrado por: Virtual Voice

In the years immediately preceding 2008, the rage in financial planning was diversification. By not putting all your eggs into one basket, some asset classes would do poorly.......but other asset classes would do well. The theory was that investors should find asset classes which are not correlated to each other. The financial planning industry and Wall Street advocated investing in many asset classes including diversified U.S. stocks, diversified developed international stocks, emerging market stocks, commodities, timber, and bonds. Unfortunately, in the Crash of 2008, all asset classes suffered dramatic declines except cash and bonds. Except for cash and bonds, the correlation differences between all other asset classes disappeared.....and their correlation became the same (correlation = 1.0). The U.S. stock market suffered a 37 percent decline (as measured by the S&P 500) and both international stocks and emerging market stocks declined even more. Many investors who had 70% to 90% percent of their retirement portfolio in stocks, were devastated. Many have delayed their plans for starting retirement. Many have simply given up on investing and figure they will work until they die. Going forwards, fear of another Crash has left many investors in a quandary in regards of how to achieve retirement. This short story explores several techniques that investors can use to revise how they save and invest for retirement.