Does Wall Street really care about your money or do they care about their fees? That question comes into view as we watch the market decline. The public relations machine is in full force trying to convince investors that there is nothing to worry about. Whether they are right or wrong, you have to understand what is behind the agenda of the industry.
A recent article on cncbc.com offers up a good example of really bad advice. Take this for example
“If you are years away from retirement, the fact that your account goes up and down doesn’t matter. Just don’t open your statement for a couple of weeks.”
Telling investors to just not open your statements is not a solution. It is important to determine how much risk you are taking and not ignore it. However, this is what Wall Street wants you to do. If you ignore it, you are likely not going to make any changes. There is more on that below.
Then there is the piece of advice.
“Even if you’re near retirement or are recently retired, financial advisors say most investors in their 50s and 60s will need to have a significant portion of their retirement portfolio in stocks for long-term growth.”
Take on even more risk when you are going to need it? Basically the advice is based on the notion that stocks over a 5 year time period turn out to be ok. They conveniently ignore the fact that the financial crisis stock market drop lasted 18 months and wiped out over 14 years of stock market growth or the stock market crash of 1929 wiped out 86% of the stock market value.
Their answer to that? Well, the financial crisis is a once in a lifetime event that would never happen again. The 1929 stock market crash was a different time. Nothing like that could ever occur again. Oh really? History would suggest otherwise.
Here is the reality of it –
I am not saying that every investor should sell their investments and go to cash. There are many different options that investors have to protecting and managing for risk. Of course, Wall Street is going to tell you.
Wall Street makes money when you buy stocks and mutual funds not when you sell them and protect your account. Thus, can you imagine a mutual fund manager or head of an investment company ever telling you to take precaution? No, that is not going to happen.
Financial advisors aren’t that much different. However, they have a bigger problem. The majority have never been taught how to navigate client’s money in difficult markets. Thus their solution and advice for difficult markets is to that you are a long-term investor and to just stay invested. They make it look like you are on the Titanic while the life boats have already dropped and you have no choice. Fortunately, you do have choices.
The professionals will tell you that you don’t want to sell now. Why would you want to sell at a low? Well, because it might go much, much lower.
To be successful you have need a Plan B for when the market is not going up. Taking risk for the sake of taking risk is not a good formula for success. If you want a different look at what to do in difficult markets, to this resource.