After six decades on this planet you’d think I would have learned my Wall Street lesson by now. It’s a proven fact that every single time I have ever ‘invested’ in the stock market, within days, Wall Street takes a tumble. Maybe this time I did learn my lesson. I was debating whether to take the funds from a recently matured CD and rather than turn it over, maybe divide and conquer in Wall Street.
To figure out how I wanted to diversify and invest my newfound portfolio, I did extensive research and decided to go the Jane Bryant Quinn way (click here): set up 3 baskets of investments. One would be secure cash, one would be in the bond fund market the remaining one would be in the stock fund market. My husband, however, had an ingenious plan. Rather than actually do the investment, just pretend to have done the investments by buying the appropriate shares and tracking them for a while.
So, that’s what I did. On Monday, August 12, 2019, I pretended to put 3 years worth of cash to cover me in a Money Market, 70% of the remaining money into a Morningstar 5 Star Rated Corporate Bond and 30% of the remaining money into a S&P 500 Index Fund. On Tuesday I made $1,423 on the bond fund; I lost $1,121 on the stock fund giving me a net profit of $302. On Wednesday, true to form, the stock market plunged 800 points and I lost all my gains when I subtracted the stock index fund against the bond fund. I was now negative $35. Not off to a good running start as far as I was concerned, but so very typical of ALL my experiences with Wall Street. They always win. I always lose.
According to Quinn, at times like these you’re supposed to live out of your cash reserves. That meant that I would be depleting my cash reserves. Granted yes the stock market always comes back, but when? A week, a month, a year, two years, five years? I can’t live this way. I have a risk tolerance of zero. And why should I tolerate anything else but the sure thing? We’re in retirement mode. I need to know and depend on a steady income. To be more truthful and realistic, I think my days as a Wall Street investor are officially over.
There’s even talk now that within a year or two, America might go back into a recession. If that’s true then I have a different set of rules to follow to prepare for an eventual recession (click here).
Focus, don’t panic
Take stock of your personal life
Make a plan
Bulk up on cash
Don’t run up your credit cards
It’s not the end of the world
A recession doesn’t necessarily mean we are “looking at gloom and doom. A recession, depending on how you define it, is typically just a slowed down economy. It may last for three months or six months or some period of time.”
“But it’s not the end of the world.”
In fact, the banking system is still strong and companies are still making money.
“When we talk about recession we are not talking about 2008. None of those signs are there.”
Side Note: I’m going to go with the two bucket strategy known as ‘safety first’. The first bucket will hold the cash I need for at least the next three years in a money market/checking account fund paying just under 2%. The second bucket will be invested in certificates of deposit and perhaps a good, short-term bond fund and maybe some intermediate-term bond funds also. This strategy plus Social Security and a pension will cover a bare bone budget for the rest of our lives. Our lifestyles will be modest BUT secure. Because DH and I are such savers, this safety-first strategy will produce enough income to cover some luxuries (travel, gifts, entertainment etc). According to Quinn, this strategy works only for people who are willing to cut their spending significantly….which is what DH and I have always done. We only need to withdraw $6,000 a year from our savings for the next 2 to 3 years. After that, our passive income will cover all our expenses and our ‘investments’ will grow unencumbered.