Bob O'Brien
Head Instructor
bobrien@mywealth.com
In a recent blog entry of mine, “The Courage to Rebalance” I mention the importance of rebalancing, and that one of the benefits is that the reduced volatility creates greater growth over a long period time. I want to elaborate on this point more, because it is critical to establishing financial security.
Let’s say you have $200k in your retirement portfolio and you have a 25% increase in one year and then a 25% decrease in the next. Most people will assume, “it’s a wash”. It’s NOT a wash! Year 1 the retirement portfolio will go to $250k and then in year two it will go to $187,500 and you are minus $12,500 and into the red after the two year period. This is isn’t a wash! This is getting hosed! Too many people fail to see this and ultimately manage their risk very poorly.
When I entered this industry in the early nineties popular advice was to just put your money into the stock market and forget about it. This advice was fairly popular and by the late nineties we had a huge stock market bubble.
Always be careful of any closed ended advice, and/or try not to take it too literally. Take “Buy and Hold” for instance. Hold it forever? Never re-evaluate the stock or mutual fund? This makes no sense at all. Jim Cramer of CNBC’s Mad Money has great substitute. “Buy and do your Homework” It’s open ended, and takes into account the dynamics of the changing economy, markets and trends.
I can speak from experience that most people in the financial services industry don’t want you to be financially educated, because it makes their job harder!
If you are not into individual stocks, and do not have time to do the homework required for investing and tend to use mutual funds, have you own saying. “Invest and Evolve” where you are seeking more information and questioning your own strategies to make certain you are not blindsided. In my blog entry, I know I lay the foundation of a great strategy, which can be tweaked and personalized for each individual, and yet staying true to the foundation.
In conclusion, your finances are one of the most important areas of your life and why would you not consistently dedicate time to learning more and more? You cannot rely on the government, or your employer to provide for you for life!
Please don’t forget to check out our courses!
Sincerely,
Bob O’Brien
