Stock market yo-yo? Or investment stairs? You choose.

The stock market sure has been a crazy roller-coaster ride lately, hasn?t it?? I recently reviewed a chart with a new client, who is age 60 and very successful professionally.? He had expressed tremendous frustration that his stock investments with a previous firm had not produced any real progress toward retirement during last 15 years.? His expectation had been (like so many of us) that holding stocks for the ?long-term? would earn him 8-10% average annual returns!? Why then, despite his dutiful adherence to conventional wisdom and supposedly sound advice, had this pre-retiree failed to make any permanent progress at all?? Take another look at this chart of the S&P 500, and see for yourself.

Unfortunately, the stock market has been nothing more than a yo-yo for investors for nearly 15 years!? (Note: this has also occurred various other times, including most of the 1960s and ?70s, the 1930s, and so on).? Even more unfortunately, many of the latest forecasts from the most reliable sources project more of the same for the next 15 years!

Financial advisors who have a vested interest in making sure you continue exposing your money to stocks, bonds, and mutual funds would have you believe you should always ?ride out? these market ?ups and downs.? In my own training and early career at a brokerage firm, I learned to use a corny (but clever!) analogy to encourage clients to stay invested.? We compared investing in the stock market to ?a guy going up stairs with a yo-yo? ? implying the yo-yo might go up and down, but the ?guy? is still going ?upstairs,? right?? As if the general trend is always up!

Look at the S&P chart again.? Sometimes, the market DOES behave like going upstairs with a yo-yo!? The blue zig-zag lines show 3 such times in the last 15 years.? Unfortunately, the first 2 times already ended badly, with our poor ?guy? falling all the way down the flight of stairs!

Who knows what will happen next?? But consider the eerily similar pattern of the 3 blue zig-zags.? Also consider our economy has serious problems, the Federal Reserve can?t kick the can down the road forever, and the European crisis could be an order of magnitude larger than the near-financial collapse of 2008.? ls our ?guy? possibly standing on the precipice again?? The answer is anyone?s guess; but people who still have 50 ? 80% of their investment portfolio exposed to the stock market and stock mutual funds should take notice.? Are you risking that you could lose 50% of your life?s savings (again)?

When I realized the yo-yo analogy is simply not true, and also understood that exposing large portions of clients? assets to yo-yo markets like stocks is not particularly comfortable for anyone, I founded Beacon Rock in May 2009.? I knew I could help people build an investment approach that would behave like stairs, not a yo-yo.? And I feel called upon to do so.? The purpose of Beacon Rock Investment Consulting is to help you prepare for your life?s future milestones in spite of yo-yo markets, as well as other probable looming risks ? such as rising inflation, rising tax rates, and (someday) rising interest rates.

Beacon Rock does not offer tax advice.? We regard tax implications to be a major element of your investment strategy, and we are always happy to help you discuss tax saving strategies with your tax advisor. ? For non-insured investments, we would refer you to Beacon Rock Investment Advisors LLC, a Registered Investment Advisor.?Securities investments such as stocks, bonds, mutual funds, options, etc., involve risk, are not guaranteed, and may lose value.

Source: http://beaconrockllc.com/investing/stairs-or-yoyo/

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