#189 - How Indexes and Bear Markets Can Make a Bad Mix

Indexes are comprised of many companies. Yet only the top few companies drive the index. What happens if we hit a rocky patch in the markets and those companies falter? On this episode of the Retirement Answer Man, I dive into the pros and Cons of investing passively v.s actively and what might happen if a Bear Market does indeed come. Bear Markets might be bad news for your Retirement. A Bear Market is a self-sustained drop of the market and if one of these shifts does happen, it might impact your ability to retire. Passive based investing becoming very popular nowadays, but if the majority of your strategy is comprised of these kinds of investments you might be in for trouble if a Bear Market shift happens before or during your retirement. A shift like this would affect the big companies in the major indexes, causing the index to drop. A drop like this could negatively affect your investments. You could always wait for things to stabilize but you may not have the luxury of waiting. In this episode of Retirement Answer Man, I’ll give you a rundown on what you can expect in a Bear Market and how you can act wisely to mitigate your risk. Passive based investing is sweeping the nation. What is passive based investing? Well, whatever it is it makes us more than %40 of the nation's investments. In this episode of Retirement Answer Man, I’ll dissect the differences between active and passive based investing and which one might be the best for you and your retirement. I also talk about how a market downturn affects them and what steps you can take to be safe. Should I use my raise to pay off debt or add to my investments? A raise can make your year! Not only does it say “good job” it gives you options to change aspects of your lifestyle, investment strategy or even the lives of someone you know. There are many things we could do with a raise.  You could spend it, invest it, pay down debt to free up future cash, or even give a gift to someone in need. In this episode of Retirement Answer Man, I’ll expound on the options a raise make possible and give you a framework for deciding what is the financial priority in your life. I’m looking to work with a retirement advisor, what red flags should I look for? On this week’s episode of Retirement Answer Man a listener writes in with a question about an advisor he is looking to work with. The advisor has worked for many firms and not stayed long at any one. Is this a red flag? Should he be worried? Tune in to this episode to hear my thoughts and get tips for asking your advisor the right questions. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN   [0:26]  Would you like to place a wager against Warren Buffett? [2:00] Should we all switch to passive investments? HOT TOPIC SEGMENT [2:59] Passive based investing is taking over the investing world. [4:47] Does passive make the market more or less efficient? [5:33] Passive investing is driven by the “hot” sectors of the market. [6:50] Jim Rogers says Bear Market is coming! [8:50] We are down to the wire in Retirement, there is no more time to wait. PRACTICAL PLANNING SEGMENT [12:27] Should I allocate my raise into my investments? [14:50] What should I do with a raise? [17:50] How does unstable politics affect my investment strategy? [19:58] Ed’s question about advisor research. [24:40] Think of an advisor as an investment. How can you have the best returns? [28:50] Should I pay off debt or fund a 401K? RESOURCES MENTIONED IN THIS EPISODE Ask a question   Work with Roger   3-Video Series: 5 Minute Retirement Makeover   Roger’s retirement learning center   The Retirement Answer Man Facebook page