One of the worst market collapses in a century has left many, especially Baby Boomers reeling – their dreams for retirement shattered by twin devaluations of their homes and their retirement savings. Those who suffered the most are those who were not given guidance by a financial professional, or who did not seek such advise. The latter group is a growing component of investors. Armed with high speed internet connections and egged on by discount brokerages offering dirt cheap commissions to “frequent traders”, a significant number of self managers have learned the hard way that investing is not a sport but serious business.
As of mid-August 2009, our clients in general are off about 10% from the US stock market’s all time high, recorded in October 2007. By comparison, the Dow Jones Industrial Average has shed over 30% of its value. We’ve significantly beaten all major averages except for a bond-only strategy since becoming part of the independent investment advisor world in early 2001. You are welcome to hear the details by contacting our office at 949 249 2057.
While in my ’20’s as an investment representative for a commodities firm, I learned the hard way how investing with borrowed money (margin) is something like trying to grab a rattlesnake. Those who are inexperienced or who do not move swiftly will be bitten badly. I was. As time has gone on, my lessons in humility have allowed me to develop strategies to keep my clients “in the game” without being devastated when storms blow down the canyons of Wall Street.
The first rule of investing retirement money is keep losses manageable. I think most experienced investors understand that even long term growth markets like equities and real estate may have periods of significant price retrenchment. Having guided clients through many such times, 1987,1994,2002 and 2008, I NEVER leave them so exposed to any one asset class that their net worth will be devastated. (more on this in one of the videos you will find in this web site : Asset Allocation Magic).
When you do not lose too much, it is fairly easy to get one’s head above water and move ahead. By not losing when markets are weak, an investor gains the ability to take it slow and easy while choosing investments for growth and income. One does not feel compelled to be aggressive, using leveage for example, if one has not fallen hopelessly behind during the lprevious market sell off.
So, the approach that works for me when advising clients, many of whom have been with me for over 20 years, is to pay more attention to preventing large losses than to proving myself a hero when markets are soaring.
