The Edge Blog

With housing costs eating up an increasing amount of the financial pie for many homeowners, the idea of paying down a mortgage more quickly can seem appealing. For people in the right situations, overpaying their mortgage has several advantages, including...

When it comes to investing in the stock market, there are few absolutes. One certainty, however, is that attempting to accurately predict the day-to-day movements of the market is doomed to fail. Global markets are too unpredictable. Economic fundamentals are constantly changing. And investor sentiment can turn on a dime.

No one enjoys watching their 401(k) account balances decrease month after month during a market decline. And it can be hard to stay the course with a balanced portfolio allocation of 60% stocks and 40% bonds when markets surge and we hear friends talk about how they have doubled their savings by investing all their money in the latest hot stock. It can be tempting to try to buy high and sell low to take advantage of market swings.

Less than half of Americans say they are prepared to cover an unexpected expense of $1,000, according to a recent BankRate poll. ¹ The percentage of Americans who feel uncomfortable with their emergency savings has increased from 44% to 58% in the past two years and among those, the majority had no savings or not enough to cover at least three months’ worth of living expenses. ² The good news? Putting together a simple budget is not difficult.

If you’ve chosen a career in police work, firefighting, corrections or emergency medical services, you already know the dangers inherent in your job. Regardless of your job function or where you serve, in any given shift, there’s always a chance that tragedy can strike. When you’re dealing with critical or traumatic situations, the last thing you want to be thinking about is estate planning. For first responders, though, one of the biggest concerns when showing up for work every day is, “What will happen to my family if I don’t make it home tonight?”

During the 2008 financial crisis, from the market’s peak in October 2007 to its bottom in March 2009, the S&P 500 dropped in value by more than 50%.1 Not surprisingly, many people panicked when their account balances, and lifetime savings, fell so drastically. Deciding to cut their losses, they sold their stocks and moved their money to the safety of low-yield investments such as Treasury bills and CDs. Over the following decade, however, the overall market return was more than 400%! ”

Over time, especially during a sustained market run-up or in the aftermath of a major market correction, your portfolio’s asset allocation can gradually but dramatically shift from its intended target. This can result in a potentially harmful imbalance in which you may unwittingly take on too much risk after market highs and too little risk during market lows—the exact opposite of what you had envisioned.

No one—except the rare contrarian investor—is ever happy about a falling stock market. Large, rapid corrections can wreak havoc on both taxable and tax-deferred portfolios. Market corrections can be especially troublesome for investors approaching retirement who may not have enough time for the markets to fully recover before they begin transitioning from saving to spending.

When you’re investing for goals that are seven or more years in the future—goals such as saving for your retirement or a young child’s education—it’s easy to get distracted by more pressing needs or to lose motivation to keep saving. It’s helpful to think of the process as being more like a marathon than a sprint.