It’s all about the ABL (Avoid the Big Loss). Everything else takes care of itself.
In some way, we are all on some sort of retirement journey. To me, this journey is like travelling to get somewhere on cruise control. But you can’t be on cruise control forever.
Eventually you need to stop, unless you are like the people in the 1994 movie Speed, where the bus could not slow down. So, at some point in that journey, you’re going to need those breaks.
Are you a 90%er?
I see a lot of investors who have been successful, and are perhaps 90% of the way to their vision of retirement. For them, the first quarter of 2020 must have been a “scared straight” moment. The question is, what are they going to do with what is effectively a second chance?
Do the brakes work?
At some point you will need to exit from that work life highway. So you had better have some brakes right next to that trusty old accelerator you have been lead-footing for decades. That is really what hedged investing is all about.
When you are “pre-retired,” assessing your expected range of possible outcomes for your portfolio becomes paramount. You need to squeeze the range of possible outcomes down. Then, you need to figure out what portfolio strategies tools of the trade you can use most effectively to stay in that tighter range of possibilities.
Do not confuse this with market-timing. Because that’s not what it is. It is simply a way to transcend the idea of the “markets” being the thing that keeps you retired. You don’t want that inanimate object to screw up your client’s plans.
Be retired, not just tired
You worked too hard to get there. And, just because you made it this far, it doesn’t mean your plan is air-tight. Nobody’s is.
However, you can increase your odds of success if you seriously consider a wider variety of outcomes for how your nest egg will be impacted by the global economy. That, in turn, allows you to widen your arsenal to manage through it.
Because as Mike Tyson famously said, everybody has a plan until they get punched in the face. The next time the S&P 500 takes throws a haymaker and catches your chin, you can keep it to a flesh wound. But it doesn’t just happen.