Over the next 20 years, 76 million people will retire. The baby boomer generation is fast approaching retirement and making plans for life after work.
Well, maybe.
For the past 8 years, the US financial market has been in a Secular Bear Market. This happens when market values do not rise above the previous high year after year. The baby boomers are still using bull market investment strategies such as the modern portfolio theory or MPT, to manage their portfolios.
Unfortunately, this has not given the expected "historic" returns of 11 percent per year. Since 2000, the S&P 500 index has returned an annual average of only 2.45 percent. Hardly the historic return investors have been expecting.
So what does this all mean? If $10,000 was invested in the S&P 500 index on 12/31/1999 at the end of 2007 it was worth $11,231.08. A historic annual average of 11 percent would have grown that $10,000 to $23,045.38. Quite a difference.
The last Secular Bear Market lasted almost 17 years. John Mauldin's New York Times Business Bestseller, Bull's Eye Investing, states ."If you invested in the S&P 500 in 1966, it was 16 years before you saw a gain, and 26 years before you had inflation-adjusted gains".
After the greatest expanse in US economic history (1980 -2000) and back to back bubbles, there is a good chance that this Secular Bear Market will last at least another ten years - or more. 76 million Baby Boomers will either have to save more, work past 65, or find an alternate investment strategy.
One such alternative is the use of a Long/Short strategy. The Long/Short Strategy dates back to 1948 when Alfred Jones, a Harvard graduate and former U.S. diplomat, also known as the "Father of the Hedge Fund", set forth to try to minimize risk in holding long-term stock positions by short selling other stocks, therefore "hedging" risk.
Today, this can be created by using mutual funds with an active management style. But, the ultimate goal of a Long/Short Hedging strategy is not necessarily to beat the market, but to attempt to minimize the downside risk of being in the market and produce a positive return year after year. - 15224
Well, maybe.
For the past 8 years, the US financial market has been in a Secular Bear Market. This happens when market values do not rise above the previous high year after year. The baby boomers are still using bull market investment strategies such as the modern portfolio theory or MPT, to manage their portfolios.
Unfortunately, this has not given the expected "historic" returns of 11 percent per year. Since 2000, the S&P 500 index has returned an annual average of only 2.45 percent. Hardly the historic return investors have been expecting.
So what does this all mean? If $10,000 was invested in the S&P 500 index on 12/31/1999 at the end of 2007 it was worth $11,231.08. A historic annual average of 11 percent would have grown that $10,000 to $23,045.38. Quite a difference.
The last Secular Bear Market lasted almost 17 years. John Mauldin's New York Times Business Bestseller, Bull's Eye Investing, states ."If you invested in the S&P 500 in 1966, it was 16 years before you saw a gain, and 26 years before you had inflation-adjusted gains".
After the greatest expanse in US economic history (1980 -2000) and back to back bubbles, there is a good chance that this Secular Bear Market will last at least another ten years - or more. 76 million Baby Boomers will either have to save more, work past 65, or find an alternate investment strategy.
One such alternative is the use of a Long/Short strategy. The Long/Short Strategy dates back to 1948 when Alfred Jones, a Harvard graduate and former U.S. diplomat, also known as the "Father of the Hedge Fund", set forth to try to minimize risk in holding long-term stock positions by short selling other stocks, therefore "hedging" risk.
Today, this can be created by using mutual funds with an active management style. But, the ultimate goal of a Long/Short Hedging strategy is not necessarily to beat the market, but to attempt to minimize the downside risk of being in the market and produce a positive return year after year. - 15224
About the Author:
John Rothe is President and Chief Investment Officer of the Rothe Financial Group. For a free report on how to invest in today's market and retirement planning tips visit http://www.absolutefolios.com
