One Bad Decision Ruined Retirement (after 40 years of work)

as a financial advisor for over 20 years, this might be one of my most important topics that I share with you on YouTube. And I say that because I've seen this destroy people's 20 years, 30 years, 40 years of preparing for retirement, and then they make one simple mistake, a common mistake, and they can put all of that at jeopardy. They can blow it all up. I don't want to see that happen to you. So today's video, I'm going to share with you what this issue is, why people are tempted to make the mistake, and how you can protect yourself from it. So what's the mistake? The mistake is being scared of what's happening in the stock market and blowing out of your investments at the wrong time. So why does this happen? I think we all know people that have done this, and none of us want to be the person that did that, and then looks back and regrets it later. And the reason people are tempted to do it is it just seems so common sense, right? Let's take COVID as an example, the market was falling, it was the fastest drop in stock market history. The S&P 500 was down 34% over a four-week period. I mean, that takes your breath away. But what's really scary is in the moment, it seemed like it could go down quite a bit more, right? The next most recent large stock market drop, top to bottom was 60%, 6-0%. And that was the great financial crisis. And what we saw happening in COVID, as is often the case, is almost exclusively with these big stock markets, it almost always feels this way that, you know, this time is different. We're seeing something that the world has never seen before. In the great financial crisis, it was the banks could fail. We could have a financial meltdown. We could find ourselves where our ATMs don't work, our ATM cards. We could find ourselves in a situation where our credit cards don't work, right? That was the great financial crisis. Then COVID, you know, that could have triggered a global depression. Fortunately, it did not. Obviously, it's not without its consequences, the way we avoided that, right? We overstimulated many economies. We had to fight inflation. It looks like the Fed may have put that in place. But it's always something that looks like this time is different, and it could go down quite a bit more. And that's the temptation, right? When people blew out of the stock market during COVID, when the market was down 25%, 30%, 35%, it felt like, well, I'll just wait till it drops another 25% or 30%. And then I'll get back in it. But what happens is you catch yourself in this spiral. And the spiral is you think, you know, it's going to go down more. And if you wanted to get out of it, let's say, let's just take a benchmark of 1000. And now it's dropped 30%. So it's at 700. I'm just making up an index. Well, if you didn't like it at 700, if it bounces and goes back to 800, right, it's even harder to get back in. So people find themselves kind of trapped. And they can't get back in because they're still worried that what they were concerned with could happen. And so in my example, if they didn't like it at 700, they sure don't like it at 800. And if it goes back to 1000, they still don't. So three, four, five years after the great financial crisis, I still had people, new people coming to me asking about becoming a client, inquiring about that. And then to find out that they blew out during the financial crisis during the depths of it, when the market was down 30, 40, 50%. And they stayed out in five years later, they still were not in. And so the problem with this mistake, the problem with succumbing to blowing out, is not only can you miss out on the rebound, but then you could miss out on years of returns. And that's the big mistake. So how do we avoid doing this? Well, first, it's super important that we have, it's super important that at times like this, when the stock market's at all time highs, we admit to ourselves that in the next 20 years, could there be a 20% correction in the stock market? Absolutely. Could there be a 30 or a 40% correction in the stock market of 50%? I don't have a crystal ball. I don't expect a 50% correction in the next 20 years, but I don't know and nobody knows. So it's a feature of the stock market, not a bug. And so in good times like this, just reminding ourselves that this can happen. And my asset allocation today should be set up such that I can weather a 30, 40, 50% drop and stay the course. That's the key is be able to stay the course, even when it seems so obvious that the market has furthered a drop. And you know, we can get back in when it's lower. That is the siren song in my industry. And just like the siren song in mythical days caused many shipwrecks, it's the same thing in investing. It caused many shipwrecks, but unfortunately, this shipwreck is our lives. This shipwreck is the result of 30, 40 years of hard work. So what do you do to protect yourself? First is understanding that the stock market tends to go up slowly over time, but then corrects quickly. Takes the stairs up, takes the escalator down. First, understanding that. Second is having an asset allocation and adjusting it from time to time. So if you might be over your skis now, too far over your skis and thinking, hey, I don't know if I could withstand a 30 or 40% correction, that would be really hard for me. Then make the correction, get to that right asset allocation. This is not financial advice. I don't know your situation, but to figure out your asset allocation, I think working with a professional, preferably a financial advisor who's a fiduciary to you 100% of the time, getting that asset allocation right is going to dictate likely more than half of your success or challenges that you face in the stock market. So get that asset allocation right. If you are tempted to blow out of stocks, often what I see really hurt people is when they make a market call and they say, okay, I'm going all out. I think the market's going further and I'm 100% out. And then at another point, maybe 100% in these all in, all out, these extreme positions, is it going to hurt you if you tweak your asset allocation 10%? 10 percentage points because you got scared? I don't know your situation. It might, but probably not. So instead of extremes, think about minor adjustments. Think about making the larger adjustments when your mind is thinking rationally, when it's not scary, when you've had a good night's sleep, right? That's the other thing is people tend to make these big, important decisions after they've had multiple sleepless nights because they're worried. And it's not just worry, it's angst. It gets above that where it's top of mind and they just want the pain to stop. And unfortunately, you're likely to make bad decisions in that type of situation. So make good decisions when the times are calm and you're in a mental space to make good decisions. Work with a professional to do it. And then also ask yourself, if you are going to make a tweak, like we talked about earlier, what information are you going to use to decide to undo that tweak? And maybe say, you know what, I was wrong. Maybe right now you think the stock market's overvalued. And as I record this today, the stock market just printed another all-time high. So maybe you think it's got to come down, there's got to be a correction. And so you're thinking right now, I'm going 100% cash. Well, you might be right, you might be wrong. But for most people, they're going to be better served not making these extreme calls, making some tweaks, and then deciding what information are you going to look at to reverse that. If it turns out what you were worried about did not happen. It's about making good quality decisions, which is why I made this video up here, which are seven things to stop doing in your 50s and 60s in order to enjoy the journey until you get to retire. Thanks for watching this one. I'll see you in there. Bye-bye.