Investing

Focus on Things You Can Control

By Charles Sizemore  |  January 7, 2020

Unless you’ve been living under a rock, you know by now that things are heating up with Iran.

Are we witnessing the opening salvo of another Gulf War—the third in three decades? Or might cooler heads prevail?

I’ll be straight with you… I have no idea. But it doesn’t look too good.

Iran’s hardliners need to retaliate to avoid looking weak, and it wouldn’t take much for this to turn into a proper hot war.

Here’s the thing: whatever happens next is outside of your control. There is literally nothing you can do that will change whatever eventually happens. Rather than fret about it, focus instead on the things you can control.

Get Your Allocation Right

If you’re worried about what a terror attack or an imminent war might do to your portfolio, you’re doing it wrong. Being correctly allocated and having proper risk management in place – two things I strive to help readers do in Peak Income – doesn’t leave you much to worry about.

Unless you’re fresh out of college, you shouldn’t be 100% invested in stocks. For most investors over 50, your allocation should generally be something close to a 60/40 portfolio (60% stocks and other risk assets and 40% in bonds and other safe assets).

So, if the worst should happen and this gets bloody, you shouldn’t be looking at catastrophic losses.

Wars tend to be inflationary. Government spending tends to rise since mobilizing an army sucks up a lot of aggregate demand. That’s good for gold or any commodity investments you might have, and generally isn’t bad for stocks unless it gets out of control, which is unlikely here.

Inflation is bad for bonds, of course. But this too is easy enough to mitigate by keeping the bond portion of your portfolio invested in short-duration bonds. With the yield curve as flat as it is these days, you’re getting very little reward for buying long-term bonds. Why take the risk when there are safer, high-yield opportunities available?

Pay Yourself

Whether bombs start falling tomorrow or not, we still have retirements to save for. And Uncle Sam has decided to be just a little more generous this year.

In 2020, the maximum dollar amount you can contribute to your 401(k) plan is increasing from $19,000 to $19,500. If you’re 50 or older, the catch-up limit is being raised from $6,000 to $6,500, bringing your total to $26,000.

For those of you who are self-employed, the story is even better. Your contribution limit on SEP IRAs and individual 401(k) plans got bumped by $1,000 to $57,000.

You may love stocks at the moment, or you might hate them…

Even before the escalation with Iran, I wasn’t exactly chomping at the bit to buy stocks. But I was on track to maximize my 401(k) contribution for the year.

Most of my 401(k) contribution goes to money market funds these days. I’m keeping my stock exposure modest. But I still stuff every dollar I can into my 401(k) because I want the tax break and the matching.

Work on Yourself

I mentioned a few times that I recently started playing in an old-man basketball league. It was a rough couple of months getting back into shape. If I’m honest with myself, I know I’m not the player I was 20 years ago and I never will be again. The ravages of time are not kind.

But I feel fantastic. I still have a long way to go, but I’m in the best cardiovascular shape I’ve been in for years… maybe decades.

Feeling better physically means I have more energy. I approach my work and my personal life with a better attitude. My kids like to see their dad wearing a sports uniform. And I’ve made some new friends along the way as well.

Obviously, old-man basketball isn’t for everyone. I encourage you to find a healthy hobby you like though.

For me, the gym gets boring after a time. Rather than energize me, it just makes me tired and eventually stop going altogether. I need the social element of a team sport to get motivated. It’s just what works for me.

My good friend from high school Ronald got into Brazilian jujitsu in his mid-30s. He’s now a black belt. He’s not naturally athletic, and he spent most of his life fighting shyness and insecurity. Jujitsu changed his life. Now in his 40s, he’s confident, and he’s absolutely killing it in his career.

Maybe rolling around on a mat with another sweaty dude isn’t your thing. I get it. It’s not mine either.

But there are infinite ways you can get in shape and better yourself. You just need to find what works best for you. And that will still be true no matter what happens in Iran.

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Charles Sizemore

Income and Retirement Strategist, Charles Sizemore, CFA specializes on dividend-focused portfolios and building alternative allocations by finding value opportunities outside of the mainstream stock market.

Charles is the executive editor and portfolio manager for Dent Research's premium newsletters, Peak Income and Peak Profits.

He is also a frequent guest on CNBC, Bloomberg TV, Fox Business News and Straight Talk Money Radio, and has been quoted in Barron’s Magazine, The Wall Street Journal, and The Washington Post. He is a frequent contributor to Forbes, GuruFocus, MarketWatch and InvestorPlace.com.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar. MORE FROM AUTHOR