Article Archives - Could Terrorism Strike Your Nest Egg?

GUIDED TOUR | CASE HISTORIES | PRESS | SUBMIT YOUR QUESTIONS - FREE

Article Archives: 06/09/2004

Could Terrorism Strike Your Nest Egg?

Readers from all across America have contacted me because they’re afraid of the impact a terrorist event could have on their nest egg. They’re losing sleep because they’re afraid that they’ll wake up one morning to discover another deadly attack has struck American soil, sending the markets into a downward spiral and evaporating their life’s savings. Their concerns are valid.

The good news is it doesn’t have to be this way! You shouldn’t be losing sleep over your money. You’ve worked hard to accumulate your wealth and you shouldn’t have to white-knuckle your way through retirement.

Wisely choosing the investments in your portfolio, having a plan of action in place, and working with the right advisor will help to put your mind at ease. Unfortunately, few advisors have changed their approach to investing to better protect their clients.

What would likely happen to various investments if we suffer another domestic terrorist attack? Initially, trading would be halted. Once reopened, there’d be a sharp sell-off in stock-based investments. Losses of 10, 20, or 30% could be possible. There’d be a flight to quality with traders and investors selling stocks and buying government bonds.

It could take days, weeks, months, or even years for the markets to recover depending on the severity and nature of the attack. Certain sectors would be hit harder than others. For instance, after 9/11, airline, travel and insurance company stocks were hit very hard. Attacks could disrupt normal economic cycles, result in greater unemployment and drastically increase the cost of living.

How can you reduce your risk? First, work with an advisor that has a specific plan of action and systems in place to help protect your money. If an event happens you won’t have time to thoughtfully consider your actions and you may not be able to reach your advisor. If your advisor has to manually adjust your portfolio then it may be too late. I have a pre-defined action plan for my clients.

Secondly, you must be able to rapidly access and move all of your money--not just a small portion of it. The investments you use today will determine your flexibility tomorrow. Stay away from high-commission products and ones that carry surrender fees like annuities.

Third, make sure you aren’t too heavily weighted in investments that can’t be quickly sold. For instance, traditional mutual funds can only be sold at the end of the trading day. That’s why I keep about half of my clients’ money in Exchange Traded Funds (ETFs). ETFs mimic the major indexes such as the S&P 500 but can be sold throughout the day at a moment’s notice like individual stocks. This means we can quickly move their money to safety at a moment’s notice.

Lastly, work with an advisor who actively manages your portfolio. If you’re retired or near-retirement your priority should be keeping what you’ve worked so hard to acquire and there are times that you will sleep better NOT being exposed to the market. Make sure you are using an advisor that understands that.

Some of my clients currently have as much as 80% of their portfolios in cash or investments that don’t fluctuate in value. As current risks subside we can easily increase their market exposure. They may miss a little growth in the meantime, but their comfort and peace of mind is more important. And so is yours.

If you’re not comfortable with your current portfolio and your advisor isn’t listening to your concerns, fire them and find a new one! Stay away from advisors that push packaged products like annuities or load mutual funds.

Find an advisor who will listen to you and actively manage your money. There are advisors who will closely watch your portfolio and be ready to respond should catastrophic events rattle the markets. They’ll listen to your concerns and invest your nest egg accordingly without subjecting you to massive commissions or onerous surrender fees to do it.

So put away the Rolaids and finally get a good night’s rest. By staying flexible and finding an advisor you’re comfortable with, you can stop letting the threat of terrorism steal your peace of mind.

If you’d like free, clear, unbiased advice send your questions to jeff@guardingyourwealth.com.

Mr. Voudrie is a Certified Financial Planner™ Professional, nationally syndicated newspaper columnist and President of Legacy Planning Group, Inc., a Private Wealth Management Firm in Johnson City, TN. He can be reached toll-free at 1-877-827-1463 or at jeff@guardingyourwealth.com.

Back to Article Archives