Author Box
Articles Categories
All Categories
Articles Resources

How to Make Money During a Sideways Market

February 23, 2012 | Comments: 0 | Views: 162

The stock market always goes up in the long run...or does it? It is commonly accepted that the stock market generally trends upwards over time so taking a buy and hold strategy should be effective. However, that has not been the case since the year 2000, and hasn't always been the case throughout history either.

The stock market has tended to alternate between period of dramatic advances of 500 to 1000% during secular bull markets, and long periods of volatile, range-bound movement. What is disconcerting is that these periods can be as long as 15 to 20 years. So what can YOU do to ensure your retirement plan or investment portfolio doesn't participate in this performance vacation?

The first step is to identify what you rate of return you require to meet your future funding needs. You will need the services of a financial advisor to help you with this. Pension funds use the 25 year government guaranteed bond yield as their discounting figure for this calculation, which today is about 2.64%. Therein lies the problem, using this low return figure would require such a large amount of annual savings relative to your annual income that it would be impossible for anybody to attain. This means that you must accept some risk in order to attain a return that would make the savings requirement affordable. I use a 6% return which would imply an asset mixture of about 60% stocks and 40% fixed income.

Whether that asset mixture actually attains that return depends on when you invest and how you allocate those savings throughout the business cycle. In a range-bound, or sideways market, income is critical - you want to get paid to wait. For this reason, dividend paying stocks should be your vehicle on the stock side of the ledger. On the bond side, since government bonds pay so little, corporate bonds should be used. Investing in corporate bonds requires specialized knowledge and enough money to properly diversify. For these reasons you should use professional money managers.

During your accumulation period you should add to either the stock side or the bond side depending on which of these asset classes are better priced. You should not automatically add in equal proportions.

The bottom line is you need income producing investments that are professionally managed and to be careful to add more to the asset class that is cheapest throughout the economic cycle. Today, that means avoiding government bonds, and instead seeking out high-yield bonds and dividend stocks.

http://www.ipcmississauga.com/ourteam/john_soutsos/prospects.aspx

John specializes in Private Client Wealth Management solutions for those within 10 years of retirement, as well as those already retired. A typical person seeking John's guidance is somebody who has accumulated a portfolio of over $500,000 and wants a more personal, sophisticated, and comprehensive approach, than what is typically offered at banks and other financial planning firms. Among John's client base are medical professionals, pharmacists, business owners, widows, lawyers, and accountants. To get a free copy of 'What Every Millionaire Needs to Know About Today's Market', send your e-mail to: jsoutsos@ipcmississauga.com

Source: EzineArticles
Was this Helpful ?

 
0
 
0
 
Rate this Article
 vote(s)
Feedback
Print
Re-Publish

Article Tags:

Sideways Market

,

Stock Market

,

Corporate Bonds

,

Make Money

,

Government Bonds

,

Low Return

,

High Yield

Forex dealing is dealing in currency trading and basically includes dealing in foreign exchange while the stock market dealing is the dealing of stock in a standard market market. The two types of

By: Anil Mali l Investing > Stocks l October 25, 2012 lViews: 243

Investments in silver metal can be done by several ways. The article talks about the best ways of silver investments. Silver, the precious metal has always attracted investors for several reasons.

By: Kyles Humphrey l Investing > Gold Silver l August 17, 2012 lViews: 305

The article offers reasonable reasons for high oil prices. Crude is indispensable and it is a great source of energy. The prices on oil keep on altering, sometimes it is too high and sometimes it

By: Kyles Humphrey l Investing > Stocks l August 17, 2012 lViews: 286

Many investors are unaware of new tax that will be levied as part of the Supreme Court’s decision to uphold President Obama’s health care reform. The investment tax, as it is being referenced,

By: Ben Esget l Investing > Retirement Planning l July 17, 2012 lViews: 405

A few months ago, I was at Starbucks talking to someone about stocks and bonds, he and his wife had worked hard and were worried about the stock market. They wanted something much less risky. He

By: Lance Winslow l Investing > Stocks l July 11, 2012 lViews: 433

The first step in the risk management process is to acknowledge the reality of risk. Denial is a common tactic that substitutes deliberate ignorance for thoughtful planning.

By: Lawrence Tepper l Investing > Retirement Planning l July 10, 2012 lViews: 240

Forex dealing is dealing in currency trading and basically includes dealing in foreign exchange while the stock market dealing is the dealing of stock in a standard market market. The two types of

By: Anil Malil Investing > Stocksl October 25, 2012 lViews: 243

The article offers reasonable reasons for high oil prices. Crude is indispensable and it is a great source of energy. The prices on oil keep on altering, sometimes it is too high and sometimes it

By: Kyles Humphreyl Investing > Stocksl August 17, 2012 lViews: 286

A few months ago, I was at Starbucks talking to someone about stocks and bonds, he and his wife had worked hard and were worried about the stock market. They wanted something much less risky. He

By: Lance Winslowl Investing > Stocksl July 11, 2012 lViews: 433

If you are interested in doing business with your stock trading, you have to understand your stock trading system. You have many companies for your stock investment, which have been listed with

By: Puja P Rail Investing > Stocksl July 10, 2012 lViews: 252

It is amazing to know when the first Financial News paper in the world launched. There are many claimants, The Wall Street Journal founded by Charles Dow, Edward Jones, and Charles Bergstresser - all

By: Sam Richard Nicholsonl Investing > Stocksl July 06, 2012 lViews: 235

Some people think that it takes a lot of money to start investing in the stock market. However, you can easily start a brokerage account for as little as $25.

By: Omar Bestl Investing > Stocksl July 06, 2012 lViews: 210