Wharton professor Jeremy Siegel was one of the first bulls to predict that the Dow would hit 20,000 eventually. 2 bear markets followed his original prediction, 2002 and 2008. Those bear markets shook investor confidence to the core and washed out many investors, many of whom sold during the declines.
Having managed portfolios since 1986, I believe that the key to success in equity investing has a foundation in two key principals: surplus cash flow and successful fixed income strategies.
Investors in the late 1990’s often assumed, due to the prolonged bull market, that they could withdraw as much as 12% annually for expenses from an equity heavy portfolio. These assumptions collapsed during the 2002 bear market cycle. I remember the late 1990’s as a period where investors chased returns including long gone names like Lucent and Nortel.
We have Nortel and Texas Instruments retirees that are still successfully retired even though the equity in their primary investments collapsed dramatically in the 2 bear cycles that followed the technology bubble of 1999.
The devotion to 3 asset categories: safety and income, high cash flow, and growth with income. When equity becomes overpriced, the ability to shift into more stable asset classes that provide income was the key for many investors to succeed after the tech bubble burst in 2000.
This weekend’s NetWorth Radio program is designed to provide guidance to investors tempted to chase returns at new highs in the equity market and those seeking consistent future returns above the historically low rates offered by traditional assured investments.
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