The Cost of Investment Tuition
Add comment January 23rd, 2008
Thomas A. Muldowney, MSFS, ChFC, CLU, CFP®, CRC, CMP®, AIF®
Tuition is expensive. There are lots of ways to pay it.
Abraham Lincoln used the phrase “Don’t change horses in the middle of a stream.” The phrase was probably coined by someone who DID try to change horses in the middle of a stream. That was, most likely, a mess. Cold, wet, and scared!
So, what do tuition and horses in the stream have to do with an investment philosophy?
Back in the late ‘90s lots of people changed strategies about the same time that the internet and technology craze hit mid-stride. They weren’t there in the beginning. No. They were the ‘smart’ ones. They waited until it was a ‘sure thing.’
At this time (mid-stream towards retirement) they changed their safe, staid, boring, and secure retirement strategy for the unparalleled opportunity to make it big! After all, technology was the wave of the future! To their dismay, the problem wasn’t that they ‘jumped in’ to tech stocks at the wrong time, the problem was that they jumped at all!
Had they just stayed on the course that they had originally mapped out, they would not have put their retirement in jeopardy. Sadly, they changed horses (strategies) in the middle of the stream (the course towards retirement) and they lost a lot. They’re still paying tuition for the education that they received from 2000 through 2002. Three long years of school, 7 long years of tuition bills, and a retirement that is still years away.
Well it’s not too different today. Recently the investment market has been…well, unfriendly. Lots of people are scared and believe it or not they’re thinking of changing horses once again. They are still in midstream (working towards retirement or already in retirement) and they are thinking of selling their portfolio so as to place it in “safe and secure” assets.
How ironic, they want to sell their portfolio while it is at a low point. This hurts them a lot…first by giving up on a well thought out strategy, second by selling out at the bottom, and third by waiting on the sidelines for the market to fix itself…but not until it has proven it by going up for several weeks, months, or years – that is, after the fact! These folks, who change horses in mid-stream, pay a lot of tuition. They pay in money and they pay in emotional fears.
My message is quite direct…if you have a well thought out strategy, and the strategy is long term in nature…stay on the horse and stay on the course, even when the stream is turbulent. Since you’ll probably not spend all of your retirement funds on the same day, you have the opportunity to be richly rewarded just by staying on track. The market isn’t just stocks, it has the remarkable staying power of you and me…the market, to bring it back to good health and happier, more profitable days…enough to make the turbulence be less troubling.
Stay on course, you’ll be rewarded for sticking with your strategy!
