Stock portfolios go up and down. Sometimes to the tune of 20% to 30% a year. Sometimes less. It can be scary, especially if you are in retirement. You cannot prevent this. But you can minimize the impact. Stocks should be invested in only if you have a long time to keep your money invested. A thirty-year time horizon is great, because the ups and downs tend to even out. Especially if you do not do panic selling.
If you used a financial advisor, you were probably reassured of the wisdom of investing in stocks over the long term. But you need to consider the short-term as well, especially as you get closer to retirement, and the time you will need to pull money out to live on.
Financial advisors only know the products they sell, and they primarily sell money management services using stocks and bonds. They take an annual fee, irrespective of how your portfolio performs. This means they make money even when you do not. Which may be okay, as long as, over time, your portfolio grows better than it would have if you managed it yourself.
If they work for a large firm, they are restricted as to the products they can sell. They also have products that may be okay, but not the most financially rewarding for you. But they are limited in what they can sell.
They are also not allowed to suggest that you take your business elsewhere, and purchase these products on your own. It is called “selling away” and is against the rules. But logically, one broker is not going to have access to everything, so you at least need to look at what else is out there. Also, a broker may be primarily focused on managing portfolios for an annual fee. This is great for them, but there are products that they do not manage, and cannot collect an annual fee on, that may work better for you. And if you take money away from what they manage, they are not able to charge you fees on the money you remove. They are not evil. Far from it. Most of them want to look out for you. They get distressed, as you do, when your account is down in value. Their advice to “stay the course” (i.e., do not panic and wait for the market to go up) is good advice as regards the products they sell. The problem is that they do not have or understand the products you need to make sure that you participate in market growth, and NEVER LOSE MONEY when the market is down.
Fortunately, you can get out of whatever portion of your stock investments that you want to protect from further losses, and participate in the rebound when it happens, and avoid future losses in the meantime.
Keep the stocks you like, the more secure ones—the stocks that pay dividends, have a history of growth and earnings, and that are not the flashy ones you see on the news. But the rest—stop the risk of loss, or further loss.
I tell more and more clients who want safety, decent growth, and decent income to consider some annuities. Rarely do they have an understanding of how annuities work before I meet with them. If they have heard of annuities, they usually have misinformation. Their advisors certainly don’t understand annuities—they rarely recommend or sell them. It is not part of what they do. And if you buy an annuity, the money your advisor manages for you decreases, because it is outside the portfolio that they charge an annual fee on. But it is in your best interest to know about these important products that provide guaranteed growth, and guaranteed income for life.
Please reach out to me at louis@louisberlin.com if you want more information. Thank you.