San Fernando Business Journal – Special Report

The primary message the securities industry has taught investors is to buy and hold, no matter what.  Such a strategy can work when you don’t need the money or you don’t have to take Required Minimum Distributions from traditional retirement accounts. Once you pass age 72 under current tax laws, you must start taking withdrawals and those withdrawal ratios increase for the rest of your life.  When you expect or are require to take money out of your account you are now in unprecedented territory. For life.  In the past 40 years we have discovered savvy investors hate losses more than they love gains. So, the money management work flips from growth and income to income and growth. Once your account experiences drawdown of 50%, for example, which may indeed be your exact experience in 2008 after market losses and a modest withdrawal, you need no less than 100% gain to get back to even. Now you need a hail-Mary pass to get back in the game.  On the other hand, if losses and withdrawals had been limited to 20%, for example, your account needs to see a 25% to get back to your high water mark.  Suddenly, limiting losses becomes crucial, as opposed to staying on that wild roller coaster ride.


Technology has greatly changed every industry. But the securities industry seems to be operating in the Dark Ages. From February 19 to March 23, 2020 the market was off 35% from peak to trough. Ist quarter 2020 the S&P 500 was off 20%, according to Yahoo Finance. If your account in the first quarter was down 2%, you can see how important it is to not get sucked into the market drama, but pay attention to how your account is doing. If your account is performing within your risk of loss parameters, you can let the markets go down like the Titanic as you see your assets remain intact. In our experience, the virtues of active management and greater diversification have been helpful in keeping client assets from being handed to them.


While mobile apps are increasingly popular to buy and check on stocks on the go, it takes more than a few trades to plan your financial success.  Here’s hoping Americans get as comfortable planning their financial success as we do planning for weddings and vacations. Here’s our website you can use. The question becomes what does it take for you to make work optional?  The job requires some math and regular reviews to see what adjustments can be made so that you know that you have the income you need after your last paycheck to continue for the next 10-30 years you want to make work optional. My goal is over the next 10 years for Americans to begin setting money aside soon after birth. There is certainly an advantage when you have 60-80 years to set money aside, as opposed to 20 years, which is when many workers start thinking about retirement.


John Grace owns Investor’s Advantage, a personal finance planning firm in Westlake Village.

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