February 2018

Two Investment Concepts That will Save Your Retirement

By Ray Mullaney
Originally published in Senior Digest

  1. The only way to make money in the market is to buy low and sell higher, and
  2. Being a safe long-term investor is not the same as buying and holding.

There are over 1 million financial salesmen all pounding the table with one singular message: “Buy, Buy, Buy!” They don’t say anything about selling; like all salesmen, they only make money when their customers buy their product. But buying and holding, especially after long market periods of major index increases, can be the biggest financial mistake of your life. Here’s the evidence:

Markets movements, both up and down, are volatile, irrational and unpredictable. Yet, some facts are obvious from careful study:

  1. After every major rise has come a major fall, and
  2. After every major fall has come a major rise.

Prudent investors MUST sell at some point, and here are the three reasons why:

  1. To avoid losses (that always result after major market increases),
  2. To lock in gains (ALL stocks rise and fall, you only make money by selling) and
  3. To ensure you will have cash to invest after the next bear market.

Bear markets can destroy your financial life. What is more important to you: squeezing the last bit of profit from a stock, be it 15% or even 30%, at the risk of losing 15% or 30% or more, or protecting your savings? No one can pick the top or bottom; to believe otherwise is to be blinded by greed. Greed is the enemy of reason, and reason is your only reliable tool when investing.

Wise long-term investors focus most of their energy on protecting their capital and avoiding major losses. I cannot emphasize enough… investors who hold stocks at or even close to market tops always, and I do mean always, suffer great declines in their portfolios! I’ve lived through many bear markets, I’ve learned about the risks the hard way. I hope you learn from my experiences.