904-232-8760 www.wolfretirement.com MONTHLY October 2017 RET IREMENT NAV IGAT ION
WHAT ARE YOU AFRAID OF? Investments and the Fear of Losing Money
Halloween is approaching, and we’ll soon start to see plenty of ghosts and goblins lurking around every corner. For a holiday supposedly about fear, we tend to overlook the things that scare people. Though, I guess it would be pretty hard to jump out and scare someone while dressed as the “existential dread of losing your financial security.” Losing money is a legitimate fear many people face. Even I’m afraid of losing money! Losing my college scholarship after I got injured playing high school football was one of the worst experiences of my life. In October, I can’t help but think about how easy it is to lose money with little to no warning. October 19 is the 30th anniversary of what the financial industry called “Black Monday.” On Monday, October 19, 1987, stock markets around the world crashed. It started in Hong Kong and rapidly spread across the world. By the end of the day, the Dow Jones Industrial Average fell 22.61 percent. This was the largest one-day percentage decline in the history of the DJIA. Dozens of economists from across the globe met in Washington, D.C., and predicted the coming years could be the most distressing since the 1930s. We’ve been in a bull market for almost nine years, but if history has taught us anything, it’s that days like Black Monday will come calling eventually.
take a dive, but you can develop a plan for what you’ll do when it does, and, more importantly, limit losses through the use of tactical investment management and/or principal-protected strategies that are very helpful and beneficial. Being afraid to lose money can keep people from taking the necessary risks to earn more dollars. The amount of risk you should assume depends on your current financial situation and your goals for the future. A significant role of being a financial advisor is helping clients define and determine risks and then protecting against those risks that can be controlled. We look at the best methods to protect what you already have, make room for reasonable growth, and put a written plan in place to protect you from the worst-case scenario. History tends to repeat itself. When you know where we came from, it can help you plan for where you want to go. -Adam Wolf, CPA, CFP®
Of course, today, we know 1987 wasn’t the start of another Great Depression. In the United States, the overall economy didn’t see much backlash, and the DJIA returned to pre-crash closing highs in less than two years. While the economy recovered, Black Monday was a rough day for those with investments in the stock market. Many faced this type of loss again in 2008; only this time, the market would take much longer to recover. We’ve been in a bull market for almost nine years, but if history has taught us anything, it’s that significant market corrections and bear markets will come calling eventually. When they do, it’s a rough time, particularly for pre-retirees and retirees with significant savings in the stock market. In finances, having no game plan is one of the biggest mistakes you can make. There is money to be made in the stock market, but jumping in blind is a surefire way to lose it all. You can’t predict when the market is going to
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