Stan's World - Winning and Losing

S.F. Ehrlich Associates |

November 15, 2018

I recently read an article in an industry journal1 titled: “You Can’t Win if You’re Afraid to Lose.” The tagline was: “To experience higher potential gains, clients need to be willing to tolerate occasional losses.”

 Left unsaid, of course, is how much an investor can tolerate a loss, even when occasional or temporary. We always assume losses in the stock market are temporary unless you sell, of course, which makes them permanent. Thus, it’s understandable when investors (also known as clients) get unnerved when the market drops; in fact, some may even be tempted to retreat until things get better.

As uncomfortable as it may feel, investors shouldn’t retreat. While it only feels like we’ve said this a thousand times, there are few safe harbors during the bad times. Nor is there a bell that will ring to signal it’s time to come out of hiding and reinvest.

The secret behind sticking to a long-term commitment is understanding the ramifications of what’s at stake. If you feel angst when markets fall, imagine how you might feel if you learned you were running out of money because you didn’t take enough risk to keep up with inflation.

There’s an old expression in this business: You can either eat well, or you can sleep well, but you can’t do both. Eating well means taking on enough risk so that you can keep up with, or even exceed, inflation over time. Doing so allows for a continuation of your current lifestyle in later years. (Hence, the ability to eat well.)

Sleeping well means reducing risk so you have little worry about how the stock market performs. In fact, a portfolio comprised solely of CDs should allow you to sleep quite well. Unfortunately, that same portfolio will probably not allow you to eat well in future years due to lagging performance.

Experiencing market fluctuation is part of eating well, as unpleasant as it may feel at times. In fact, I can easily argue that it’s preferable to suffer the angst from market fluctuation than to endure the abject fear from learning you no longer have sufficient assets to get you through retirement.

We know the stakes feel bigger when you’re in retirement because you can’t go out and replenish your IRA account. Our job is to maintain the right balance in your portfolio, and we work on that every day.




1 Israelsen, Craig L. “You Can’t Win if You’re Afraid to Lose.” Financial Planning, Oct. 2018, pp. 50-52.
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