My severance pay was wiped out. How can I recover my recent investment losses in this “late game”?

Financial Advisors


Ask Your Advisor: I am 81 years old with a $118,000 mortgage and an IRA worth $110,000. Do you need to exit your investment to pay off your mortgage?

Ask Your Advisor: I am 81 years old with a $118,000 mortgage and an IRA worth $110,000. Do you need to exit your investment to pay off your mortgage?

My retirement savings have been wiped out by market shifts over the last few years. I plan to work there for another 5 years. Late in the game, what kind of investment proposition do you have?

– Daniel

I am sorry to hear that you were hit as you entered the homestretch into retirement. I know it can be disappointing and potentially stressful.This type of scenario That’s why we recommend keeping a broad diversification and an asset allocation that fits your timeline, aligns with your goals, and keeps you on course in turbulent markets. (If you have more questions about investing or retirement, this tool can help match you with potential advisors.)

Potential Reasons for “Wiping Out”

I don’t know how much you lost, but to describe it as ‘annihilated’ speaks volumes. Let’s build some context around it. If the last few years have wiped you out, I suspect one or both of two things have happened.

  1. You had a concentrated portfolio.

  2. You tried to time the market.

These are two common pitfalls of investing that expose you to a significant amount of unnecessary risk. (Consider working with a financial advisor if you need help aligning your investment with your risk tolerance.)

Holding concentrated and diversified portfolios

Ask Your Advisor: How Can I Recover Recent Investment Losses 'In the Late Game?'

Ask Your Advisor: How Can You Recover Your Recent Investment Losses “Late Game”?

A widely diversified portfolio never wiped you out, suggesting you may have kept a concentrated portfolio.

Let’s use the classic 60/40 portfolio as an example. This portfolio typically holds 60% of the assets in stocks and 40% in bonds.a According to Bloomberg, the diversified 60/40 portfolio averaged 6.5% annual return over the 10 years to 2022. This return depends on the content of the 60/40 portfolio. They also differ in other allocations such as 50/50 and 70/30. But the basic premise remains the same. The past few years have not wiped out a broadly diversified portfolio. (Financial advisors can help you make important investment decisions, such as how to spread your money across stocks, bonds, and cash.)

A diversified portfolio is a good risk mitigant. Concentrated investments tend to be more volatile and are subject to certain risks that can be protected by diversification. Whenever I come across a stock that is heavily concentrated in a new client portfolio, I always wonder how one awkward CEO, one failed product launch, or one bad publicity could “wipe you out.” point out that there is

Does having a diversified portfolio always mean positive returns? Some years are good, some years are not. For example, his 60/40 portfolio is down about 16% in 2022. However, as long as you incorporate these variations into your plan, you have created a significant risk mitigation strategy.

Maintaining Market Timing and Appropriate Asset Allocation

Ask Your Advisor: How Can I Recover Recent Investment Losses 'In the Late Game?'

Ask Your Advisor: How Can You Recover Your Recent Investment Losses “Late Game”?

It’s good to think that investors can sell their holdings just before a drop, sit on the sidelines with cash, and buy back when they expect it to start rising again.

Investors often mistime the market.Many people try this and sell it. rear Their portfolios will fall in value and it will be too late to buy back and they will miss the gains. It’s not because they’re not smart. Markets are quite unpredictable and people are emotional especially when it comes to money.

Make sure your asset allocation is right for you. This means being in line with timelines, goals and risk tolerance. How much you allocate to stocks, bonds, and cash also depends on when you need to withdraw. Proper asset allocation can get you through a bad year without having to sell to cash. (If you need help with asset allocation, this tool can help match you with a financial advisor.)

next step

I think your best bet is to find an asset allocation that works for you and stick with it. This is not a magic solution with huge profits. But with more consistent returns, you can seize opportunities, reduce risk, and actually plan rather than expect extraordinary investment returns.

Tips for Finding a Financial Advisor

  • Finding a financial advisor is not difficult. SmartAsset’s free tool matches you with up to 3 vetted financial advisors serving your area and allows you to interview advisor matches for free to determine which advisor is right for you. increase. If you’re ready to find an advisor who can help you reach your financial goals, get started now.

  • Consider several advisors before deciding on one. Finding someone you trust to manage your money is important. As you consider your options, here are some questions to ask your advisor to help you make the right choice:

Brandon Renfro (CFP®) is a columnist for SmartAsset Financial Planning, answering readers’ questions about personal finances and taxes. Have a question you want answered? Send an email to AskAnAdvisor@smartasset.com. Your question may be answered in a future column.

Please note that Brandon was not a participant in the SmartAdvisor Match platform and was compensated for this article.

Photo credit: ©iStock.com/PamelaJoeMcFarlane, ©iStock.com/simarik

Ask Posting Advisor: My Retirement Savings Has Been Wiped. How Can I Recover My Recent Investment Losses In This “Late Game”? First appeared on the SmartAsset blog.



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