Know What 'Long-Term' Means for You
- By DailyWorth Team
- August 10, 2011
As we wrote on Monday, market downturns can be good buying opportunities for long-term investors. But what is a long-term investor these days?
Given that the 10-year annualized total return of the S&P 500 is now 1.9% and over five years it’s 0.6%, you should probably rethink your view of “long-term,” says financial planner Eleanor Blayney, president of Directions for Women, a financial planning resource for women.
Her advice for tweaking your asset allocation strategy: Know when you’ll need your money, and subtract five or 10 years from that. If you had planned to retire at 65, normally you might begin dialing back the equity portion a few years prior to that date.
Many investors have operated under the idea that a 10-year window would assure strong market returns or a solid recovery after a slump. Recent history has shown that’s not always the case.
Instead, make 55 or 60 your mental retirement date, and start shifting into a more conservative asset allocation a little earlier, depending on the flexibility of your deadline, tolerance for risk and margin for error—and need for growth. By shortening your investment time horizon, you reduce your exposure to higher risk investments sooner, which can provide some protective armor during tough economic times.
Look at the time: Have you been forced to delay goals because of lousy stock market returns?
Are you an entrepreneur? If so, please answer this quick question:
<a href="http://polldaddy.com/poll/5389266/">How big is your start-up/small business in terms of annual revenue? Check the range that applies.</a>
Brokerage Products: Not FDIC Insured • No Bank Guarantee • May Lose Value
The content in this website with the exception of that provided by Charles Schwab have been provided by third-parties and/or prepared by DailyWorth who is not affiliated with, associated with or endorsed by Charles Schwab & Co., Inc. (“Schwab”). Therefore, the information contained within the content of the website that has not been prepared by Schwab should not be considered as approved, endorsed or recommended by Schwab. Schwab does not guarantee that the Information is accurate, complete or timely, nor does Schwab make any warranties to you regarding any results from using the Information. This also includes any links that DailyWorth provides as a courtesy to users of their website to third-party websites. Third-party websites are owned and operated by independent information providers (“IIPs”).
Interviews with Schwab employees created by DailyWorth are for general informational purposes only and should not be considered an individualized recommendation or investment advice. Investing involves risks, including the potential loss of principal invested. Keep in mind that diversification strategies, do not ensure a profit and do not protect against losses in declining markets and may not be suitable for you.
The content provided by Schwab is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab suggests that you seek professional assistance.
Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC. (0413-2767)