Have you ever heard of the 10-5-3 rule? It’s one of the outdated financial planning axioms that just don’t make sense anymore. Today we’ll tell you why and explain interest rates, inflation, and factors that determine where we’re headed.
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Just like the technology we use everyday, financial planning ideas and strategies slowly become outdated. There comes a point in time where things that worked before just don’t fit our needs and align with our goals any longer.
On this episode of Your Money, Your Life, Don Cash will talk about outdated financial axioms and help you understand why they can’t be trusted any longer. Now, that’s not to say that eventually they could become appropriate strategies again, but our current environment requires different maneuvering.
Have you heard about 10-5-3 rule? It states that you should expect a 10% return on stocks, 5% return on bonds, and a 3% return on stocks. This was shattered right after the year 2000 and then again in 2008 because interest rates crashed. Levels continue to be so low and you can’t expect anything close to that on cash and bonds. To help you understand interest rates, Don will break down how inflation and rates work together and what the Federal Reserve aims to do.
The common denominator has been government involvement and subsidies. Will there be inflation going forward and how will it affect this 10-5-3 rule? Don will lay out the risk and what to expect.
Our Cash Connection question today comes from Rose who asks about whether investing should be changing with the election coming up soon. Well, this is a question we get every four years. The answer is your investing should be based on goals, time horizon, personal circumstances and things of that nature rather than who wins an election. Markets around the world are continually factoring the election and possible outcomes into asset prices so keep that in mind as well. Ultimately though, focus on the things you can control.
Listen to the entire episode or click on the timestamps below to skip ahead to a specific segment.
[0:33] – An update on what’s going on with Don.
[3:45] – The 10-5-3 Rule
[9:07] – An example of how inflation works.
[11:59] – Items with the greatest inflation.
[14:06] – Could 10-5-3 rule become more relevant?
[15:16] – Cash Connection: Should I be investing different since we have this election approaching in a few months.
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Donald W. Cash – CPA, CFP® is an independent advisor. Don began his career in 1985 as an accountant after graduating Rutgers University. In 1990 he entered the field of Estate Planning with a concentration in long term care planning. Don has been advising clients in the baby boomer and retirement market for 20 years. He has helped over 1,000 families with their planning needs. He advocates a holistic approach to Estate and Financial Planning as has relationships with other professionals including Attorneys, CPA’s, Mortgage Specialists, Insurance Specialists and Asset Managers. Don is married to Cathy and have 4 children, Carly, DJ, Nick and Tori. They live in Freehold, NJ.