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The Founders Group

Conservative Retirement Planning Specialists

We are conservative retirement planning specialists. Let us show you how to minimize risk and develop the income you need for your retirement. Contact us for an ABC Profile Review and see how you can enjoy the benefits of conservative retirement planning.

Conservative Planning

The type of planning we specialize in is called conservative retirement planning. It’s not something you do for a few months and then try the next mutual fund flavor of the month. Conservative planning is core investing. Its long-haul investing.

There is a basic need for those who use a conservative retirement planning strategy, which is simply the need to sleep at night. They don’t want to worry about losing money. They are not after quick market gains and fast money schemes.

Risk vs. Reward

One of the fundamental ideas in finance is the concept of risk vs. reward. It is generally assumed that the greater the risk, the greater the potential return. For instance, a U.S. Treasury bond pays out less of a return than a corporate bond because the U.S. Government is less likely to go bankrupt than a corporation. The risk associated with the corporate bond pushes the issuer of that bond to offer a higher return.

Types of Risk

Here’s a short list of the types of risk inherent when investing for retirement:

  • Market Risk
  • Business Risk
  • Purchasing power risk (inflation)
  • Sovereign risk
  • Interest rate risk
  • Reinvestment risk
  • Education
  • Liquidity risk
  • Country Risk
  • Unsystematic Risk
  • Event Risk
  • Political Risk
  • Price Risk

If risk avoidance is your heartbeat, then you have to realize patience is the key to conservative retirement planning. Not patience in the sense of recovering from losses, but patience in accruing gains over a longer period of time.

Simply put, conservative investing is a long-term strategy to manage risk in such a way as to conserve principal while maintaining buying power.

Retirement Planning Paradigm Shifts

When we look over the last 30 to 40 years in the financial planning community, there seems to be large paradigm shifts in the American culture that have affected the way they plan for retirement. Recognizing these changes in the way our culture views their retirement savings can be a key to successful retirement. Below is some material from David P. Vick’s book, “Bat-Socks, Vegas and Conservative Investing” with explain some of the major paradigm shifts over the last 30-40 years. (Quotes used by permission, all rights reserved by David P. Vick)

“There are also very interesting alterations in “investing paradigms” which have taken place over the last 30 to 40 years. Changes of this magnitude usually take a long time to blossom. I believe our perspective on investing has changed because of a cultural transformation in America and the effect of bear markets – especially big bear markets – on future economies.”

Looking Back at the Dow from 1980

1980-graph

“If you were an investor in 1980, when President Ronald Reagan was elected, what did you see? I mean, if you could literally stand on a time line of the DOW in 1980 and peer backward over the last ten to twenty years, what would you see that would affect how you invested going forward? The 70’s were turbulent financial years with investors largely investing in bonds, large cap mutual funds, and blue chip stocks. The 70’s were the up and down years of a mid-term bear market that started in the fall of 1965 and didn’t recover until the fall of 1982, covering 17 restless years. Who can forget long gas lines and double-digit inflation? That’s what you saw looking back from 1980.

The prevalent investor strategy at the beginning of the 80’s was unmistakably conservative. They looked for safety and dividends. They weren’t “speculative” in nature, but desired small, consistent gains along with dividends. Not much risk.”

m-times

“In contrast, what was the view of an investor looking back on the market when President Obama took office in 2009? Again, if you could stand on a DOW timeline and look back, what would you see?

An investor looking back on the last 20 years in the DOW would see a huge M in the graph the closer it got to his time – the “irrational exuberance” of the 1990’s Bull market, followed by a tech bubble bursting into a near 50% loss from 2000-2002, followed by a 5-year Dow run up with the peak of the second half of the “M” in October of 2007, followed by the housing bubble, bank bubble, finance bubble, and whatever other bubble was out there, bursting into flames by the low point of March 2009.”

Gambling vs. Investing: A New Paradigm Shift

Which definition below best describes the money you have in your investments or qualified plans like your 401k’s?

“In · vest”, verb
1. to commit (money) in order to earn a financial return.(2)
“Gam · ble”, verb
1. a: to play a game for money or property b: to bet on an uncertain outcome
2. to stake something on a contingency: take a chance (3)

If you’ve been to Vegas in the last 10 years, you surely can’t miss the fact it is a retiree’s haven. The very people who, when they were growing up, thought of gambling as evil, have now made Risk City their number one travel destination. Not only that, but some of the most popular cable TV shows are televised gambling events. You can watch it on television and play it online 24 hours a day. It is in our 21st century American blood. The acceptance of gambling represents a definite cultural shift and has doubtlessly had an effect on not only the way we invest, but if we invest at all!

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