Accept Responsibility for Your Nest Egg Losses and Learn from it

The first step in learning how to protect your nest egg in the future is to accept your responsibility for your current losses.

The wealth management industry is now saying many investors (baby boomers) are apathetic about their retirement nest egg and take no real interest in it until retirement gets close.

They also add that if investors would only learn about investing they would be able to make better choices and have better returns.

There is no doubt they are right about you taking responsibility. But you pay them for their professional advice to select the investments and to mange and protect your nest egg through good and bad times.

As to you choosing a better fund isn’t that like “timing the market” which they say is impossible? How can you confidently pick a fund when it is almost impossible to compare like with like anyway.

With respect there is no way 90% of investors will spend the time trying to understand all the terminology of managed funds and then do an analysis to try and select ones to put into a balanced portfolio. Isn’t this what financial planners are paid to do on your behalf?

Don’t forget their caveat, “past performance is no guarantee of future returns”. Plus studies have shown that no fund provides consistent returns over the long term (to use their favourite phrase).

So you are really between a rock and a hard place. If you try to educate yourself in the ways of finance and try to select “good” funds you are likely to be on your own and they will tell you it was a stupid idea not to use a “qualified financial planner”.

But if you do use a “qualified financial planner” and take their advice to buy and hold for the long term you lose again. Many of you will be sitting on significant losses from following such advice right now.

But don’t worry they’ll say, the long term average return is 10% and in most cases the stock markets comes back and goes even higher in 5-7 years.

So what do you learn from this? If you don’t want to become a financial investment expert then you need to build some rules into your investments and you need to put in some safety features.

You don’t need to know how a car is put together to drive it safely. In the same way you should not have to know investment details in order to invest. In fact these funds go out of their way to say how easy it is, until it all goes wrong.

In a car if you go too fast you can slow down by using the brakes. If your investments begin making extraordinary gains you have to take some profits off the table and put them in a safe place. That’s applying the brakes to your investments.

How do you know? Well any return above the long term average might be a good start.

Just remember bubbles always burst and cash is king when they do.

If you are involved in a car crash the airbag is there to hopefully stop you losing your life. This is a stop loss (of life). In the same way you need to either have in place a stop loss or in managed funds you have to instruct your financial planner when he is to use a stop loss to hopefully save your nest egg.

You cannot expect to be able to pick winning managed funds to invest in. If  the markets are up then it is likely any fund will make a profit. So profits tend to take care of themselves and a fund manager can normally make profits in a bull market 😉

When a bear market occurs fund managers don’t do so good. That’s when you really need to be in control. Avoiding large losses in retirement is rule #1.

So you have to really make sure they know what you want them to do and put it in writing. It should include a clear statement of when you want them to put your money into cash.

So you can see using these techniques you don’t have to know all the technical stuff. Just know when you want to be in or out of the market and when you want to take some profits. And accept responsibility for whatever happens subsequently.

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