In­vest­ing: What We Learned from 3 Ma­jor Eco­nomic Events

Modern Healthcare - - NEWS -

In­vestors look­ing to the fu­ture can learn from th­ese re­cent his­toric events.


LES­SON: Di­ver­sify your in­vest­ments, and don’t over-lever­age the equity in your pri­mary res­i­dence.

When the hous­ing bub­ble burst in March 2007, it nearly brought down the world econ­omy. Mil­lions of home­own­ers saw their equity van­ish and, in many cases, ended up­side down on their mort­gages.

“When it comes to your pri­mary res­i­dence,” ad­vises Robert Tucker, MD, vice pres­i­dent of wealth man­age­ment at Plan­corp LLC in St. Louis., “it should be con­sid­ered a place to live, rather than a piece of your in­vest­ment strat­egy.”

FI­NAN­CIAL CRI­SIS ( 2008- 9)

LES­SON: Plan for the in­vari­able ups and down in the econ­omy, and ad­just your port­fo­lio as the eco­nomic winds shift.

The pro­longed eco­nomic hang­over fol­low­ing the fi­nan­cial cri­sis un­der­scored the po­ten­tial volatil­ity of in­vest­ing in stocks and bonds.

When stocks start to cool down, con­sider real es­tate, gold or an­other op­tion. “Our bank­ing sys­tem is gen­er­ally safe, although the strength of a fi­nan­cial in­sti­tu­tion needs to be con­sid­ered, along with its con­ve­nience and cus­tomer ser­vice,” says Tucker. Also, be aware of the pro­tec­tions avail- able. For ex­am­ple, make sure not to ex­ceed max­i­mum bal­ances in ac­counts cov­ered by FDIC in­surance.


LES­SON: Em­ploy fi­nan­cial ad­vi­sors and ad­vi­sory firms that are fully trans­par­ent.

The Mad­off Scan­dal in 2008 was a vivid re­minder that there are a lot of sharks swimming in Amer­ica’s in­vest­ment wa­ters. “If some­thing seems too good to be true, it prob­a­bly is,” says Tucker.

Bernie Mad­off was able to swin­dle in­vestors by claim­ing “pro­pri­etary” in­vest­ing strate­gies that he would not dis­close, and mar­ket­ing his ser­vices as an “exclusive club.” This be­hind-the-veil ap­proach worked to en­tice high-net-worth in­vestors, who only later rec­og­nized the red flags. When choos­ing a fi­nan­cial plan­ner, fol­low th­ese tips;

En­sure there are no po­ten­tial con­flicts of in­ter­est that could cloud the ad­vi­sor’s rec­om­men­da­tions.

Be sure you have an ad­e­quate sys­tem of con­trols in place to guard against mis­man­age­ment. For ex­am­ple, sep­a­rate cus­to­dial and re­port­ing ac­tiv­i­ties from the ad­vi­sor.

Be sure your ad­vi­sor, and his or her or­ga­ni­za­tion, has the breadth of ex­pe­ri­ence to pro­vide the full range of ser­vices you need.

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