Should I Ride Things Out? Investors Ask Natalie.

Dear Natalie,
 
On Monday March 9, 2020, when the stock market posted the worst point loss on record, I called up my financial advisor to discuss our strategy. Her response was, “Just ride it out.” I looked at various blogs online, and that seemed to be the consensus. A lot of them said, “Market timing doesn’t work.”
 
However, I lost more than half in the Great Recession, and quite a lot in the Dot Com Recession, too. So, I’m just not comfortable sitting on my hands for the next downturn. I’m too close to retirement to lose that much again. However, I have no clue of what to do.
 
Stressed Out and Clueless
 
Dear Smart to be Stressed Out,
 
Here are a few facts to consider.
 

• Economists are predicting that there is a 60-65% chance of a 2020 Recession.
• The cost of the last 2 recessions = most investors lost more than 50%. (55% in the Great Recession; 78% in the Dot Com Recession.)
• It took the NASDAQ Composite Index 15 years to crawl back to even from the Dot Com Recession.
• It took 7 years for the Dow to recover in the Great Recession.
• There are still 3.5 million mortgages that are severely underwater from the Real Estate Bubble bursting 13 years ago.
• “Ride it out” is a sales slogan. At the bottom of the bear market that slogan changes to, “If you sell now, you’ll be selling low.”
• Market timing doesn’t work. It’s not a matter of riding it out or jumping out. A proper plan protects you from market corrections, and allows you to profit from bull markets – instead of losing half and only recovering your losses in the bull markets, which is what has happened to most investors in the 21st Century).
• There is an easy plan that keeps you safe from downturns, while earning gains in the bull markets. That plan isn’t used by old-school brokerages yet. Many of them are still set up to profit from the Buy & Hope plan, which is a last century idea that hasn’t worked at all in the 21st Century. However, there are brokerages that use a better plan. Many of those brokerages also encourage annual rebalancing, which is another hallmark of our time-proven system.

 
 
If you lost more than half twice in the 21st Century, that’s a big red flag that you have far too much at risk. If we are entering a recession, and your strategy is to ride it out, you are risking losing half of your wealth again – just as you did in the last two downturns.
 
If you are close to retirement, you aren’t supposed to have very much at risk in the stock market. Even if you are just entering the work force, it would be a good idea to overweight safe since this could be a recessionary year. If you don’t know how to read your brokerage statement or your retirement plan, you may need to get an outside, unbiased 2nd opinion to know what you really own and how much you really have at risk. If you’re being counseled to ride it out, then you might just hit a lot more sales-speak when you for details to understand exactly what you own and why.
 
So, in summation, “Ride it out” is never a good idea. If you are on a losing team, then you would work hard to get a new game plan and to strengthen the areas that are weak. It’s true for winning in sports. It’s true for winning in life. It’s true for winning in investing. Wisdom, a good plan and right action are the cure.
 
You are stressed out because you know deep down that your plan is wrong. That's smart. However, now you need to learn what a better plan looks like. We're here to help. Call 310-430-2397 or email [email protected]. 

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If you’d like to see what a personalized sample nest egg pie chart looks like, just email [email protected] or call 310-430-2397 to access our free web apps. If you’re interested in knowing exactly what you own, how much at risk you are for losses, and what you can do to protect your wealth, then consider getting an unbiased 2nd opinion on your current financial plan. Call 310-430-2397 or email for pricing and information.

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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.