One of the saddest phrases about money is, “We used to have a lot more.” And yet, it’s a common refrain because investors forget the most important rule: “Don’t lose money.”
Easy to say. Hard to do.
With the race to live longer, I’m afraid investors are getting ahead of themselves, investing like their younger selves as if they’ve already found the fountain of youth. I know investors in their mid-60s are eschewing fixed income, looking for the big gains from the market, hoping they’ll reach that magic number, imagining flying private.
So far, so good. But when you hang around long enough, you know this story doesn’t always end well.
It’s human nature to think we’ll be able to time the market. To believe that we’ll get out before it’s too late. But when you look back at the stock market crashes we’ve seen so far this century, they are real-life examples of investors losing lots of money. Someone’s selling at lower prices.
The problem with losing money is there will be a breaking point. We’re all long-term investors until your spouse asks, “How much did we lose today?” and “How much do we have left?” There is a point of no return where one cannot handle another year of no returns, where one sells out, out of despair with lots of blame to throw around.
When it comes to generational wealth, remember how you made it. Chances are you saved ‘til it hurt, worked your profession, and now have savings to show for it. Generational wealth happens when the savvy investor swoops in to buy stocks at a discount because he doesn’t need the markets. He was careful with his money. And he taught his kids how to be careful with theirs.
If we could live our investing lives in reverse, I think investors would be happy to have just a couple do-overs, to avoid those life-altering hits when generational wealth was lost.
Action Line: Know thyself and invest accordingly. When you’re ready to talk, let’s talk. Email me at ejsmith@yoursurvivalguy.com. I’m interested in your story. But only if you’re serious.
