There’s a time when you’re most vulnerable as an investor. It’s not when you’re knee-deep in work, with retirement waaay off in the distance. It’s when, as you dream about retirement, you look at your statement and do some mental math: when can I retire? You realize, hmmm, I’ve got some money, but I need “X” dollars to retire. I need to make “X” percent on my portfolio to get there.
Now, with this dream in mind and a portfolio full of stocks, your palms get a little sweaty when the market drops by 800 points or so. You’re paying a little closer attention to the down days. Maybe a little too close, especially when you think about explaining lost money to your spouse.
Remember, when dreams start getting broken apart like a tree in a tornado, you need to rely on your strategy, not on a dream, to get you through.
Action Line: I’d like you to remember that so far this century, the S&P 500 has declined peak to trough by over 30% not once, not twice, but three times. Plan accordingly.
