Is Diversification the Way to Go?
October 2nd, 2009 | by admin |I have been very concerned lately as I watch my investments vanishing before my very eyes. I am not an experienced investor, so I felt the need to go searching for some satisfactory answers about options for my portfolio. Should I invest in gold coins and gold stocks ? Perhaps Mutual Funds
It’s my belief that when you are highly motivated to find an answer to a question, that answer invariably appears, and so it was with my search. Someone referred me to a book by Robert Kiyosaki called Rich Dad’s Prophecy. I had read Rich Dad Poor Dad and found it informative, but that was the only Robert Kiyosaki book I had ever read. I immediately ordered a copy of Rich Dad’s Prophecy and what I read in that book was a huge eye opener for me.
We are all aware of the cyclical nature of the stock market. We expect it to go up, down and sideways. However, in the long term we always expect to see a gradual incline. Normally, if we were to look at a graph covering many years, we would see an upward motion. We are seeing quite a different picture these days and it is a rather frightening situation.
An added problem to this already serious situation, is that by the year 2016 the first of the 75 million baby boomers in the U.S. will be turning 70. When these baby boomers reach age 70 1/2 they are going to be obligated, under law, to take all their assets out of their 401k. The Government has been patiently waiting for the tax dollars, and this is their pay day. Just think for a moment what this means!!
Literally millions of people are going to be selling off their mutual funds and stocks, because the Government tell them they have to. It’s so very simple….when there are more sellers than buyers, then the market goes down. When these baby boomers sell off their mutual funds and stocks, there are not going to be that many younger people buying, to balance the sales with purchases. This is a disaster waiting to happen. I suppose the Government could step in with an amendment to the law, allowing people to keep their money in their 401k longer, but then the Government would not get their tax dollars until much later.
Most people already know that they are in deep financial trouble, but they don’t realize the full impact. They are still being told that as long as they diversify, they will be fine. They are being told to sit tight and ride out the storm! I believe we are wise to listen to Warren Buffet when he states…. “Diversification is a protection against ignorance. It makes very little sense for those that know what they are doing”.
We still have a few years before 2016 is upon us, so there is still time to get a firm handle on your finances and make some intelligent decisions. Educate yourself on financial matters and take action now to accumulate additional funds to see you through to your retirement and beyond. The experts tell us that having a home-based business is the best way to do this. The prediction is that there are going to be millions of new millionaires created during the next 10 years. You can be one of them…there are many great opportunities out there….find the one that resonates with you and run with it.
Tags: diversification, economic recession, finances, financial insecurity, financial security, home-based business, job loss, loss of income, Mutual Funds, Stock Market