Posts Tagged ‘income’

The Top 2 Things You Can Do To Battle Market Fatigue

Monday, August 22nd, 2011

 

You need only turn on the TV, radio, or skim a newspaper to realize we are right in the middle of some challenging economic times. The BIG question is what can we do when our individual abilities to change the quagmire we’re stuck in is minimal? Here is the shortlist.

 

#1 Look at your personal situation and choose the best plan of action

 

If you are trying to accumulate funds for retirement, do you really want to retreat to the safety of CD’s or money market funds when returns are struggling to yield 1% on your money? Yes, you would at least have a guaranteed return of your money but at these rates, even the slow but sure tortoise would give up the race.

 

Historically, the market is a very predictable and much higher yielding place to be. That being said, the number one prerequisite of market investing will be your ability to weather the volatility that is inherent in equity investments. Simply put: don’t be a jack rabbit about it.

 

Investors who cycle through euphoria and misery only to jump in and out of the market typically do so at precisely the wrong times. The scenario plays out something like this:

When the market is doing well, investors feel renewed confidence it is the place to be. They plunge wholeheartedly in, at a point that reflects a price that is much higher after two years of outstanding returns. The market may or may not continue on its upturn for a while. However, at some point, the market will sour and begin a hasty retreat. These same people who got in at or near the top begin to panic. They decide they can no longer stomach the volatility and opt out after the market has been in a free fall for some time.

 

This is a recipe for disaster and one reason why we see such a roller coaster of reports in the news each day. If you lack the fortitude to invest in the market and weather the vacillations, don’t jump in and out – stay out. Buying high and selling low is not the way to go.

 

#2 Consider alternative strategies for investing in the market

 

An example of a strategy that may take some of the trepidation out of investing in the market is using the strategy of dollar cost averaging. This is already inherent in payroll deduction retirement plans. Since the funds are invested on an ongoing and regular basis, investors will automatically get the benefit of purchasing more of the investment when prices are low and less when they are high.

 

This same strategy would work in investing non-qualified money. Instead of investing it all at once, take the sum to be invested and invest a certain portion each month over a period of time instead of plunging it all in at once. This way, if the market does go down, you will be able to capture a lot more shares or units at the lower price.

 

Kurt Rusch CLU, ChFC

Debt & Income Insurance

Wednesday, February 23rd, 2011

In the world of insurance, there are two kinds: debt insurance and income insurance. Most consumers don’t think of it in that way, but it is important to understand what these classifications really mean and what they can provide to you.

Debt Insurance

Medical Insurance – pays for your medical bills so your family will not incur the debt of a medical procedure.

Automobile Insurance – pays for expenses incurred as a result of owning a car. The expenses covered will not only include the physical damage to your car but the liability that may incur to others as a result of you operating your car. This coverage is mandated by the states as well as physical damage coverage if the car is financed.

Homeowners Insurance – pays for physical damage to the home as well as liability that may arise while living in the home subject to policy limitations. And, as we all know, homeowners is also mandated when homes are mortgaged.

Long Term Care Insurance – pays for the cost of daily care when a person is no longer able to take care of themselves.

The common thread among these contracts is that all of them ultimately will pay someone else: mechanics, builder, caregivers, doctors and so on. Simply put, debt insurance helps us navigate emergencies and avoid life altering debt as much as possible. What debt insurance does not provide is protection of our income lifelines.

Income Insurance

The way to insure one’s income is by securing the proper amount of Disability Insurance. Debt insurance provides coverage of expenses incurred; disability insurance provides the money needed for your family to live on if you become sick or injured and unable to perform your job.

Many people mistakenly assume disability insurance is unnecessary because the Social Security system will provide for us in the event of a disability. While there is some truth to this, there are gaping holes which exist in actual benefit redemption.

First, the vast majority of claims that are filed with the Social Security Administration for disability are denied. 65% of initial claim applications were denied in 2009.* Secondly, the definition that social security uses for disability is vastly different than the verbiage commonly used by private providers. Over 51 million Americans classify themselves as fully or partially disabled. Only 8 million disabled wage earners were receiving Social Security Disability (SSDI) benefits as of June 2010.* Finally, the amount that you qualify for can vary greatly from the amount you may qualify for on a private contract. The average SSDI monthly benefit payment in 2010 was $1,065 per month. 52% of claimants received less than $1,000 per month.*

* Statistics as reported by the Council for Disability Awareness

In the world of consumer choices, there are two kinds: what you want and what you need. Evaluate your needs at a deeper level than face value; what do you really need to do to protect and provide for yourself and your family?

Kurt Rusch  CLU, ChFC