Saturday, November 13, 2010

Thinking About 2011

Since retiring in our forties in 2007, each year has been a test of whether we had saved enough for retirement. Our retirement accounts declined significantly in 2008, bottomed in 2009, and 2010 has been a seesaw recovery that is on the upside at the moment. For now, our retirement savings are still sufficient. However, I expect 2011 will continue to test our ability to stay in early retirement.

If the stock market should advance, our early retirement will be sustainable for another year. A return of 8-10% in our retirement portfolio is a level I would consider a comfortable confirmation. This could be achieved by either a 10% return in my company stock or a 10% overall return in the market. Both of these outcomes are possible given that the third year of a presidential term is typically the best year for the stock market with the S&P averaging +21.7% since 1933 and the Dow averaging +24.7% since 1945.

If the stock market should decline, I want to avoid my big mistake of 2008 of staying invested. This time, I plan to cash out a significant portion of our managed accounts if they should drop over 5%. In anticipation of occurs for an extended period. While I don't expect to make money during a market fall, I hope to mitigate the losses by being in cash and shorting some stocks.

At this point, I believe the President and Congress will begin taking the necessary steps to accelerate the economic recovery leading to a rise in the stock market. However, I am also prepared to be disappointed.

For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2010 Achievement Catalyst, LLC

1 comment:

Michelle said...

Be careful when you get out of market if it declines by over 5%. This is not a wise plan as market can quickly recover after dropping 5%. Instead use support and resistance levels. At this time, S&P 500 has shown that it is going to decline after reaching its high twice. You should have already sold your market shares and be out of market. If not, I think there will be another opportunity early this week (week of 11/15). Good luck.