Wichita, KS (PRWEB) April 12, 2007
The recent downturn in the stock market may have unnerved some equity investors. When the market takes a dive, some people's retirement dreams may drift further away and become a deferred reality. But John Barton, a Wichita-based CERTIFIED FINANCIAL PLANNER™ professional, says that when building a retirement ark to weather stock market storms, investors have to be sure that they're being guided by a well-defined investment strategy and not their emotions.
"Recently the stock market drop of more than 500 points caused some investment jitters. Many people saving and investing for retirement saw a reduction in account balances," said Barton. "While we certainly hope the worst is over, there could still be more rough waters ahead. If investors prepare by charting a proper retirement plan, they will be better equipped to weather future waves in the stock market."
Historically, the stock market is cyclical with euphoric highs often followed by nail-biting lows. But Barton warns, "Corrections in the stock market are a natural phenomenon. Just like people, the stock market often has to trim its split ends in order to encourage new grow. Investors should not be misled based on the history of individual stocks. Historical data certainly helps to give a sense of overall current and past financial condition; however, it gives no real indication about the future. Looking at historical data is flawed investment logic -- it's like looking in the rear view mirror while trying to navigate the sea ahead. If investors make decisions based on past performance, they will almost always miss the boat and will likely miss out on the stellar returns achieved in the past."
But sound logic has never been a hallmark of American investors. According to many studies, 80 percent of investors, or roughly 75 million of the 95 million investors in the United States, exhibit irrational investing behavior.
"It's this irrational behavior -- not the market swings per se -- that typically wreaks havoc on investor's portfolios," says Barton.
Unfortunately, no one has an investment crystal ball to predict where the market is headed and when it'll go there. Given the unpredictable nature of the stock market, Barton has four tips to help investors build a retirement ark that will guide them safely through future stock market storms.
"It's no question that investors get very emotional when it comes to their money," says Barton. "But rash decisions often lead investors to make portfolio changes that may have adverse effects on their growth potential." Instead, Barton advises that investors should replace emotion with a disciplined investment strategy. "Don't make long-term decisions based on a short-term view," he cautions.
HAVE A PLAN
The best way to manage emotions is to follow a plan. Preparing for retirement without a detailed strategy is like setting sail without navigational equipment. "A retirement plan should guide decisions about where to invest, when to shift investments and how to regularly refine your strategy," says Barton. "A detailed strategy involves understanding the risks you're taking and learning to mitigate those risks. There are a number of methods for managing risks, including diversification, examination of historical volatility and asset allocation. Once an investor thoroughly understands the investments under consideration, selections can be made based on individual tolerance for risk."
KEEP A LONG-TERM PERSPECTIVE
"Your retirement reality is likely a few years off," said Barton. "If this is the case, you should not be chasing short-term returns." Barton advises that just because a portfolio is experiencing a down month or a down quarter doesn't necessarily mean that it's off course. "People often lurch from a safety to a growth-based strategy based on market news and perceived risk. But the daily news is never as important as the long-term outlook."
GET PROFESSIONAL ADVICE
A financial adviser at the helm can help assess and refine retirement planning strategies. "In addition to helping you determine the appropriate amount of risk for your age and financial situation, a financial professional can look for trends and may be able to spot sectors that have a higher likelihood of good investment returns," Barton says. "The best way to create a sturdy retirement ark is to prepare a plan and start building now."
ABOUT JOHN BARTON, MSW, CFP®
John Barton is an independent, fee-based financial planner and investment adviser representative who specializes in investment management, retirement planning and estate conservation. He has been serving clients in Wichita, Kansas, for over 20 years. He is a member of the Financial Planning Association and received his CFP® mark of distinction from the CFP Board of Standards in 1990. He completed the required financial practitioner coursework through the College for Financial Planning in Denver, Colo. Barton graduated from Wichita State University with a BA in psychology and received his Masters in Social Work from the University of Kansas. He has also completed several hours towards a masters degree in business administration.
Barton is a former member of the board of directors for Prairie Homestead Retirement Community and the Mental Health Association of South Central Kansas. He recently co-authored an article for Research magazine, a leading trade journal, on a variety of ways advisers can help their clients create predictable retirement income streams.
Visit http://www.centerpointewealthmanagement.com for more information about Mr. Barton and his company.
When you need an expert to speak on complicated financial topics in an easy-to-understand manner, please call John Barton.
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