I was at the baseball game last Saturday when I ran into John and even though our team was winning, he looked a little distraught. I said John you look a little down, here have a Bon-Bon, and he said I would buy my own if they weren't $9.85 for a small box. I said yeah I know either things cost more these days or I'm not making enough. I asked how the family was, he said great and that his sister Samantha (Jones) suggested that he give me a call. I asked him was everything ok and he said well it was up until about five years ago and that he will call me on Monday to discuss further.
John called that following Monday to set an appointment and boy I was in for a big surprise when he showed up the next day. You did what John! I cannot believe you did such a thing I said. He said yep I did it. My assistant came running in and asked was everything ok, I said everything is under control. I had just learned that John had committed the biggest mistake that one could make when it comes to a 401k plan. He had literally turned his 401k into a 201k by selling the holdings and cutting the amount in half. <book excerpt> Chapter 7 Retirement Can Still Happen "The New American Dream" when I was a kid I never knew why my mom would only go to the store when things were on sale. She would tell me all the time that you always look for bargains son. You buy winter clothes in the summer and summer clothes in the winter she would say. When I became an Investment Advisor, I followed the same rule as an adult. First, when you invest, you do what no one else is doing. If you have a 401k and it is not doing well, you do not really lose until you actually sale the underlining investments. If you have good investments in good times, then those same underlining investments will reinvest into your good investment at a bargain price in bad times.(same goes for real estate, but that's a blog for another day) Once the market returns (and history have shown us that it will eventually, another blog story for another day) then you my friend have just paid half price for an investment that is worth twice as much. <end of book excerpt> The statement that always trips people up in this chapter is Good Investments, not Crappy Investments. Even in a bad economy, people will still need toilet paper, soap, and deodorant so naturally sales are still being made. The last statement I made too John before he left is one that I will share with you. NEVER, EVER DO WHAT YOUR FRIEND OR CO-WORKER IS DOING WHEN IT COMES TO YOUR OWN 401K INVESTMENTS. They are not living your life and you are not living theirs. They will not retire when you retire, so stop playing Russian roulette with your retirement nest egg.
So what happened to John you might ask? He is on his way to living The New American Dream, with a few adjustments to his retirement plan of course. I have to go now because my assistant just informed me that Samantha (Jones) is on the phone and she wants to know everything there is to know about Universal Life Insurance.
Posts
