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  • Writer's pictureRotchford & Associates


Updated: Sep 23, 2020

When you think about your own risk tolerance and if you say on a scale of one to ten, I’m a ten! Is that only when your 401(K) is going up? Can you stomach the losses you (most likely) saw in 2008 again? See, we all want 10% return with NO RISK. And, some years we’ve been getting it! In such an uncertain world, I wouldn’t bet on it to continue!

Speaking of betting, have you ever heard the stock market being referred to as “legalized gambling?” I see the logic. Companies don’t always show their hand. There is often more known behind the scenes than we’re privy to. By the way, gambling can be fun & exciting! Bells, whistles, free drinks – woo hoo! When it comes to me having money to supplement Social Security in the future, I’ll take boring and safe all day long. But that’s just me!

The definition of insanity

Over and over people lose lots of money in the stock market. For example, the tech bubble in the year 2000. Then again after 9/11/01. Then the granddaddy, 2008. Why? “Buy and hold.” Sounds smart. My grandfather used to say “you can’t time the market.” No offense grandpa but of course you can! BUT, it’s always on the way out! If you put a dollar in the market and you pull it out when it’s down, say fifty cents, you timed it fairly poorly. If you take it out when you have a dollar and fifty cents, you did well. This is all a part of risk tolerance. If you have a hunch that the markets cannot keep hitting record after record, what should you do about it?

Buy low, sell high.” Hmmm, if that’s as simple as it sounds, why don’t we all just do that? Briefly put, stomach and discipline. When things are going up, we want to buy them, when they’re going down, we want to sell them. Human nature. We have to somehow override this nature and do the uncomfortable, the opposite of what feels good! Buy low, sell high contradicts the buy and hold strategy. Which one is better? The world is volatile to say the least. I have a feeling the smart money is on buy low and sell high! How do you do this??

What should I do?

Next to your health, your money is the second most important thing (well, in this life…). Make sure you understand what you own! Know your fees. Know the level of risk. If you don’t have the time and/or desire to do so, seek assistance! And, by assistance I mean an honest (preferably independent) financial advisor that’ll put your best interest before his or her own. Are you familiar with the term “fiduciary?” We’ll do a future article on the fiduciary standard when it comes to financial planning – it’s important.

If you’re a DIY person and do have the time and desire to manage your own finances, here’s a simple strategy you can employ right away… set an exit strategy bottom line. For example, if I lose 20%, I sell. (By the way, if your percentage is less than twenty percent, say ten percent or fifteen percent, should you really be in securities? You may be better off in CDs or fixed annuities, for example.) Okay, so you hit 20% down, override your emotions and sell! Execute your own strategy. When the S&P 500 was down 57% in early 2009, do you think you would’ve felt better with “only” a 20% loss?

On the flipside, don’t forget to “dollar cost average” back in! Buying low is the 2nd part of that equation and it tends to be forgotten.

What, me worry?

I’ve said it for more than twenty years, money goes down a lot faster than it goes up! Did you know the 2008 correction saw twelve years of growth evaporate in seventeen months? Not good! And, even worse if you’re closing in on retirement or already retired.

I like the exit strategy but how can I be proactive if I’m risk averse?

Here’s a proactive strategy for you… I call it Robin’s strategy. When I was new in the financial services industry, I met a woman named Robin. She said she didn’t like to lose money. Hmm, seems smart! So, Robin explained how she protects her IRA and still gets reasonable growth. With her 401k, she had made money, lost money and made money again. She felt like she never really got ahead of the game. When she changed jobs, she moved her money to an IRA and became more proactive with it. She put the money in a safer position than her age dictated she should (by traditional financial planning standards). On all earnings each quarter, she would “sweep” them off and put them in the “safe bucket.” After time, the safe bucket was sizeable and she could take more risk on the growth bucket. This protect and grow strategy worked out well. I’ve gone over the details of Robin’s strategy to numerous people over the years and have personally seen how it can work for more risk averse clients.

Why should I think about any of this now? My money is flying high!

Think “buy low, sell high,” things are at all-time highs! How can you afford to buy low, if you don’t sell high? With this country and world in such unchartered territory, perhaps it’s worth your time to seek out a second opinion on your financial accounts sooner than later. Immediate concerns, such as the elections, appointing a new SCOTUS judge, civil unrest and the virus bumping into cold and flu season should give us pause. And, the longer-term concerns, such as healthcare, borders, taxes, debt/deficit, inflation, Social Security/Medicare solvency, etc. should warrant a close eye on your financial/estate planning matters on an ongoing basis.

For more information on financial planning such as this, give call us at (623) 523-0444 or email us at or

We’d be honored to offer you a no cost second opinion to get you going or make sure you’re on the right track. Our focus is always on planning over products and education over sales…

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