Crash Proof Retirment Has Investors Speculating, Not Protecting

Crash Proof Retirement Has Investors Speculating, Not Protecting

by: Brendan Magee

Early 2016 has been trying indeed for investors. China has been imploding. The Dow has seen one hundred point drop after another. Low gas and oil prices, which you would think are good for the consumer and give people more money to spend on other things, apparently, are being linked to the turbulent stock market. It's enough to make your head spin.

With all that, the question is what do you do with your retirement accounts? Do you leave your money in the stock market and ride it out or get out before it gets really bad? It's hard to block out the foot steps of 2008's crash. Add to all that, the 24 hour news cycle of doom and gloom and you have got a recipe for panic. All you want to know is, where is a safe place to invest your money and get rid of the knot in your stomach?

To the rescue comes a "Crash Proof Retirement." The mantra of Crash Proof is that Wall Street is stacked against you, the investor. The stock market is way to risky especially for seniors to have their money in stocks, bonds, and mutual funds. They can educate you on safe alternatives to the stock market where your principle is guaranteed and no matter what happens with the stock market, you will always earn a rate of return. You will be off the roller coaster ride.

Sounds great and what could be wrong with a guarantee of principle and a guarantee of some kind of return, especially for senior citizens? The answer is plenty, but we will just focus in on faultiest of its arguments.

In one of its t.v. ads Crash Proof is getting a testimonial from one of its clients and the woman goes on to say that she knows there's going to be a crash. She has seen it happen before. Now here's the reality. She is right.  There have been stock market crashes before and there is no reason to think there will not be several in the future. The most important questions and what this testimonial leaves out is:

 Does she know when the next crash will take place? Does she or any one else know how bad the crash will be? Unless you know the answer to these questions you are speculating and another word for speculating is gambling. No one in their right mind believes that going into a casino is a profitable place to go.

The problem for investors, especially ones who are in a panic about what the stock market is doing to their retirement accounts is, they are not in their right mind. They are scared, nervous, and worried. This is their life savings that is taking a beating. Everything they have been working a life time for is on shaky ground and it is serious business.Under those circumstances, desperately looking for solutions, the wrong thing to do can easily seem like the right thing to do.Worst of all, there are those who profit off of investors behaving in a dysfunctional manner. They are very convincing and can seem like what you have been waiting for all your life.

If along with the testimonials for crash proofing your retirement was the equivalent of the surgeon general's warning against smoking and using tobacco, maybe investors would think twice before having their retirement accounts "crash proofed." Frankly, there is one. In the Prudent Investor Law, the law governing the investing of qualified retirement accounts in this country written in 1990, there is a finding that every investor should be familiar with, "Bargain shopping in an attempt to separate the winners from losers through forecasting and analysis is deemed wasteful."

In plain language if you base your decisions on what you believe will happen in the future you will lose money. No one, and I mean no one, can predict the future, and if they even begin to hint at what the future will bring, run do not walk away from that person, making sure you have your money with you.

Ask yourself, If you knew what was going to happen in the stock market tomorrow and you stood to make a fortune, how likely are you to share that information with the public for free?  How likely would you be to share the information if you knew that giving it away was going to cost you the fortune you stood to make?

There is plenty more wrong with the idea of crash proofing your retirement, but at the top of the list is the notion that investors can predict the future. People can no more predict a crash than they can predict a massive surge in the stock market, and frankly, you do not have to in order to be a successful investor.

The rules are simple. Own equities, diversify, buy low/sell high. They are simple to understand, but not the easiest follow all the time. If anything, make sure you know what it looks like to appropriately apply these rules to your money, and then enlist the help of a coach in following them with discipline under and all circumstances. More than any thing your behavior, and nothing else that will determine your success as an investor.

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With comments or questions e-mail brendan@coachgee.com or call 610-446-4322.