In yesterday’s blog, we discussed the first three in our series of mistakes you cannot make in the volatile stock market: burying your head in the sand, always following the crowd and ignoring the experts. Each of these mistakes could lead you down a path of losing the money that will support you in retirement. By having the foresight to know what to avoid, you can prevent yourself from making costly mistakes—and secure the money you need to live the retirement you deserve. Here, we’ll look at the last two in our series of mistakes you cannot make in the volatile stock market.
- Falling for the same lines. What happens when the stock market goes down big? You call your advisor on the phone and say, “I don’t want to lose any more money. Take me out.” Your advisor replies with lines like, “Those are only paper losses,” “Stay the course,” “We’re in it for the long haul” and, “They’re only losses if you sell.” Here’s our advice: Don’t fall for it. These are lines used time and time again by people who are not truly interested in your benefit. Instead, you’ve got to listen to what the experts are saying, and most experts agree that if you are older than 50, at least half of your money should be in a place where it is protected from stock market volatility.
- Thinking rate of return is more important than protecting your money. The simple response is, it’s not. Let’s consider an example. If you have $100,000 in the stock market, you make 50 percent, and then you lose 50 percent, you’re even, right? Wrong. If you have $100,000 and the market goes up 50 percent, then you have $150,000. But if it goes down 50 percent, now you have $75,000. That equates to a 25 percent loss from where you started. Conversely, let’s say you lose 50 percent on $100,000. You now have $50,000. If you make 50 percent back, are you back to where you were? No. Making 50 percent back on $50,000 only puts you at $75,000. The point is, it is far easier to lose money than it is to make money.
Here’s why protection against losses is more important than rate of return. If you have your $100,000 protected, and the stock market goes up 10 percent, you now have $110,000. If the stock market goes down, you don’t lose anything. You still retain that 10 percent. As you can see, protecting your money against losses is more important than realizing huge gains. Make sure to go forward with your money and never backward.
Avoid these mistakes you cannot make in the volatile stock market to set yourself up for a more financially-secure future!
When deciding what is best for you as an investor approaching retirement, ask yourself, “Do I have financial security?” If the answer is no, would you like to? At Ty J. Young Inc., we believe in protection against potential loss while still enjoying stock market gains. Sound too good to be true? It’s not. Give our knowledgeable advisors a call today at 877-912-1919 to learn more!