On October 10th, as a part of the SAS Work/Life program, FSI Partner Chad Smith spoke to employees at the SAS Campus in Cary. The topic dealt with common Retirement Myths that are circulated by popular sources which tend to become etched in our beliefs as facts or definitive truths surrounding investing and the economy. Some of these myths included:
Myth #1: Cash = Safety
There’s been no shortage of negativity in the news concerning the economy whether it be Unemployment, the European Debt Crisis or the looming Fiscal Cliff, all of which we’ve written about recently. The popularity of cash and bond holdings has increased dramatically since the financial crisis, but there is a danger for investors to forget about purchasing power risk (i.e. inflation) which can play a major role in the real value of “safe” assets. Chad discussed the increase in demand for cash and bonds over the last 5-10 years and the historical precedence for market returns in the years following recessions.
Myth #2: Trust your Gut Instincts
Understanding the influence that fear can have on your investing decisions is crucial. The average investor is often cited in many studies to underperform actual average returns for investments due to emotional mistakes around extreme price movements in the stock markets. Chad shared several instances in which using research vs. your emotions makes better sense when making decisions about your investments.
Myth#3: Death of the Cult of Equities
There’s been several references to this phrase recently that harkens back visions of the 1979 BusinessWeek cover story of a similar title. An important fact to understand is that recessions are a natural part of the economy’s ebb and flow. In fact, since 1931 we’ve faced 14 of them occurring on average about once every 6 years. We are now three and a half years removed from the bottom of “the Great Recession” so are we really facing the death of equities? Chad talked through several historical charts that illustrated the resiliency of the stock market after previous drops in stock prices.
These are just a few of the myths that were discussed during the presentation. If you would like to receive more information about the rest of the presentation, contact hgudac@financialsymmetry.com.
