KEY008 - Four Things NOT to do and Five thins you must do with your financial affairs when the ma...

1. 04 In This Edition

1.1. In this edition of The Key To Retirement, I'm going to talk about the four things NOT to do and the five things you should DO when the markets crash.

1.2. And, in today's bonus segment we're going to show you an amazing tool that I think is going to revolutionize the personal financial management industry. And, it is totally free!

2. 05 What's New?

3. 07 Feature Segment

3.1. So, you hear on the news that the markets have crashed. A free fall is often times how the news anchor puts it.

3.1.1. How do you respond?

3.2. What we're going to talk about today is exactly that.

3.2.1. The things you should be doing when you hear that the markets have crashed.

3.3. But this time it's different! NOT!

3.3.1. Let's look at the past and see. Where do we start?

3.3.1.1. Well, let's look at the metrics of the most recent market crash and see if we can't find some similar market events in the past.

3.3.1.2. Since 1956, there have been 7 market crashes.

3.3.1.2.1. Suez Crisis (Jul '56 to Dec '57)

3.3.1.2.2. OPEC Oil Shock (Oct '73 to Sept '74)

3.3.1.2.3. Savings & Loan (Nov '80 to Jun '82)

3.3.1.2.4. Black Monday (Jul '87 to Nov '87)

3.3.1.2.5. Russian Ruble (Apr '98 to Aug '98)

3.3.1.2.6. Tech Bubble (Aug '00 to Sept '02)

3.3.1.2.7. Financial Crisis (May '08 to Feb '09)

3.3.1.2.8. Average 6 month gain after the market bottom = 20%

3.3.1.2.9. Average 12 month gain after market bottom = 33%

3.3.1.3. So, what are the options?

3.3.1.3.1. 1. Understand the opportunity - invest an additional sum of money (eg: $10,000)

3.3.1.3.2. 2. Remain invested - start a monthly contribution (eg: $100/mth)

3.3.1.3.3. 3. Do nothing - hold what you've got.

3.3.1.3.4. 4. Take a defensive stance - sell the position, invest in cash for a year and re-enter the market.

3.3.1.4. For those of you who know me, you've probably heard me say this before.

3.3.1.4.1. Don't let emotions dictate your investment decisions. Focus on the logic.

3.3.1.5. In every case, the next ten years has generated over a 100% return.

3.4. So, let's start off with what you should NOT do first.

3.4.1. 1. Don't panic!

3.4.1.1. The only reason why people panic is because they are afraid of the unknown.

3.4.1.2. If you knew what was causing a market event, you could better assess what you needed to do and how to respond.

3.4.1.3. Knowing the historical data should help.

3.4.2. 2. Don't talk to your friends.

3.4.2.1. People will only tell you their successes - brag.

3.4.2.2. They don't know your situation like a CFP would.

3.4.3. 3. Don't sell to "stop the bleeding".

3.4.4. 4. Obtain information from your advisor as to why the markets are reacting the way that they are.

3.4.4.1. See our Fly On The Wall Investment Update Calls.

3.5. What should you do?

3.5.1. 1. Educate yourself.

3.5.1.1. The Fly On The Wall Webinar.

3.5.1.1.1. www.keytoretirement.ca

3.5.2. 2. Ensure you are investing in an Active management style. This allows your portfolio managers to take advantage of the market volatility.

3.5.2.1. Mutual funds and ETFs alone do not provide this.

3.5.2.1.1. You must align yourself with a discretionary investment firm who can oversee your portfolio strategy and position your portfolio on your behalf to take advantage of any opportunities that present themselves.

3.5.3. 3. Consider tax-loss selling.

3.5.3.1. Trigger the paper loss today, re-invest in another version of your current portfolio (thus allowing you to avoid the superficial loss rule in Canada) and carry back the tax-loss generated to one of the three previous years to offset any tax paid on any capital gains realized.

3.5.3.2. Carry forward the tax loss to a future year to help offset any gains generated.

3.5.3.3. December is a busy month for me because I review portfolios to see if there are any tax-loss opportunities to take advantage of.

3.5.4. 4. If your paperboy qualifies to invest in the same investments you are in, consider migrating your portfolio to a more appropriate investment solution that is better suited and priced for your level of investment account.

3.5.4.1. Thresholds:

3.5.4.1.1. < $100,000 - Mutual funds.

3.5.4.1.2. $100 - $500,000 - Managed accounts

3.5.4.1.3. $500,000 + (Investment Counselor / Portfolio Manager

3.5.5. 5. Re-calibrate your financial plan

3.5.5.1. Assumes you have a plan.

3.5.5.1.1. If not, this should be step 1 - before anything else.

4. 09 Bonus Segment

4.1. www.mint.com

4.2. So, how do you keep track of your finances?

4.3. Do you use software? Programs like Quicken, Microsoft Money or Simply Accounting?

4.4. Well, if you're like most of our clients, you have probably tried to use a software program. You gathered all your statements, sat down, created opening balances for all of your accounts - assets, liabilities and then began to log each and every transaction.

4.5. And then, it happened. It simply got away from you. It became almost a full time job and you just didn't have the time to keep on top of it.

4.6. But let me ask you this question. What was your goal? Why did you want to keep track of your finances?

4.7. Was it so you could see where you spend your money? Was it to track of your net worth?

4.8. Well, all this and more can be done, without the nasty logging of transactions. Without the time consuming account reconciliation. Really, without any effort.

4.9. So, let me introduce to you www.mint.com. The most user-friendly personal finance program I've come across in a long time. And the best part - it's totally free.

4.10. Here's how it works.

4.10.1. You log on to www.mint.com and register your free account.

4.10.1.1. Then, gather your login information for all of the online accounts you have. Things like your personal banking user name and password, mortgage login details. Basically, if you can login online to check your account balance for one of your accounts - asset or liability - gather it together.

4.10.1.1.1. It uses bank level security. No one can move any money using mint and, its' 24/7 monitoring will notify you of any large transactions or changes made to your account.

4.10.1.1.2. Then, add your accounts and let mint consolidate your information into one, streamlined, easy-to-understand place. And, it's smart enough to know your trip to Tim Horton's, should be categorized as a coffee shop expense!

4.10.1.1.3. It does this for all the transactions that take place in your accounts.

4.10.1.1.4. You don't need to update mint. It updates itself.

4.10.1.1.5. You can log in to your mint account using your computer, iPhone, iPad or Android smartphone.

4.10.1.1.6. You'll be amazed at how much analysis you can do on your spending habits, how you can track whether you're moving closer to or further from your financial goals.

4.10.1.1.7. And, isn't this what you wanted in the first place?

4.10.1.1.8. So go now to www.mint.com (or check out the links in our show notes for this show (episode 08) and try it out. It's totally free.