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Investment Hopes for 2013

Understand your stock market risk now.


What are your biggest investment hopes and dreams for 2013?

Every year I talk with Minnesota investors who are caught like a deer in the headlights just thinking about their answer to that question.

Ask yourself what you are looking for in the relationship that you have with your investments in 2013.

The relationships that you have with your doctor, lawyer, dentist, and car mechanic are all based on trust and mutual respect for doing what is right in your best interest. In 2013, you need to make absolutely sure that your relationships with the individuals or companies that provide you with investment advice share those same characteristics.

A good place to start is to make sure that you understand of the risk level that you currently have with your investments. The stock markets are currently at multi-year highs.  Interest rates are at multi-year lows.  Any moves in the opposite direction are going to dramatically affect the value of your investments.

A good example would be your individual company retirement plan account. Every month thousands of Minnesota company retirement plan participants contribute their own money to their company retirement plan accounts. For most Minnesotans, their individual company retirement plan account is one of their largest financial assets.

With so much at stake for their retirement, you should spend more time asking questions about the investment options available to you on your company retirement plan menu.

Understand your investment risks now before the stock markets fall and interest rates rise. The principal value of your individual company retirement plan account is at risk if one, or both of these events take place.

Investment history is full to dates and times when the stock markets gave back the majority of long-term investment gains over a short time period.  The last dramatic stock market decline took place from July 2008 to March 2009.

Make absolutely sure that you are confident now about how much investment risk you want to take going forward.

The good news is that your buy-and-hold investment management strategy worked well in 2012. The bad news is that your chances of preserving last year’s investment gains with the same investment strategy in 2013 are about zero.

Buy-and-hold only works when the stock markets are going up and interest rates are going down. The stock and bond markets never move in the right direction for individual investors forever.

Ric Lager
Lager & Company, Inc.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

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