A $400,000 Game of Russian Roulette
When Fear Wins: A Cautionary Tale of Market Timing Gone Wrong.
We've all heard these investing mantras a million times:
"Stay invested for the long term. Ride it out."
"Best time to plant a tree was 20 years ago. Second best time is today."
"Time in the markets beats timing the markets."
We know these things are true - so WHY do we continue to make the same mistakes & panic every time there's a market pullback?
Human nature, of course. We're constantly wanting to believe that THIS time is different. It reminds me of a killer quote from Alex Hormozi:
Think about every mistake you've ever made in your life. I'd guarantee more often than not, you're not kicking yourself because you didn't know any better. You're frustrated because you knew what the right decision was, and ignored your instincts anyway."
News headlines, short-term focus, herd mentality, recency bias, confirmation bias - all this crap contributes to people freaking out every time the market hiccups.
Let's dig into a real-life story showing the true impact of this panic-induced idiocy.
Flashback to March 2023
The fall of Silicon Valley Bank raised fears about the financial system as several regional banks collapsed. We had both international and domestic issues that led many to believe a market crash was imminent.
One of my clients gives me a call & says they want to go all cash. They had about $1,000,000 invested and roughly 10 years to go until retirement.
But I wasn't going down without a fight. We talked through the usual playbook:
We cannot time markets. Warren Buffett can't, you can't, and I certainly can't.
Use History as Our Guide - The market has rallied 100% of the time from its drawbacks.
Understand your Risk Tolerance and Timeline. If we need tweaks, fine. Wholesale changes? Almost never the answer.
Keep a Long-Term Mindset. Market fluctuations happen way more often than most realize.
Ensure your investment strategy aligns with your overall financial plan. Investments can make or break a plan.
Despite this, after multiple heated debates - I lost this battle. Frustrating as hell, but it happens.
Treasuries were 5.5% at the time, and this individual said the guarantee sounded great compared to the expected stock market rollercoaster.
$1,000,000 getting an essentially "guaranteed" 5.5% sounds pretty damn good, right? Sure does! Especially if things tank.
BUT... what if that market doesn't crash as expected? In fact... What if it goes on to rip 45.91% over the next 17-18 months?
Narrator voice Well, that's exactly what happened.
Now, this individual wasn't 100% in the S&P 500. They had a diversified portfolio aligned with their risk tolerance.
But it's still a 40% mistake. $400,000, which could make a major difference in someone's financial future.
Using the 4% rule, that's an impact of $1,333/month in retirement funds. Assuming $1,000,000 vs $1,400,000 - annually, it gives us way more wiggle room financially by being able to safely pull $56,000/year instead of $40,000/year.
That's the difference between living comfortably & watching every penny in retirement for some folks.
The point is, this happens way more than people realize. Even super sharp people with advisors in their ear can let emotions sway their decisions. Investing is hard, folks.
Here's a Simple 3-Step Framework on How to Avoid this Mistake:
Pause - Emotions Don't Drive the Bus
Do This: When the market goes wild and you're itching to do something, stop. Take a breath. Is it fear, panic, or just FOMO talking?
Why It Matters: Emotions are natural, but they shouldn't drive financial moves. Remind yourself: market dips aren't new, they're just part of the game.
Plan - Are we Aligned?
Do This: Before you hit the panic button, revisit your investment strategy. Does this move align with your long-term goals? Does it make sense, or are you just reacting?
Why It Matters: Your plan was built for the long haul, not for every bump in the road. Stick to the fundamentals—big moves usually mean big mistakes. Adjust, don't overhaul.
Partner - Phone a Friend
Do This: Before making a knee-jerk decision, talk to your advisor or a trusted friend. Run it by someone who's been through this before.
Why It Matters: It's easy to get tunnel vision when things get rough. A quick consult can save you from turning a temporary dip into a permanent setback.
A few emotional mistakes like this over 30-40 years could cost you millions in your long-term plan.
You don't need to be taught, just reminded. You're setting yourself up for financial success & independence. Don't shoot yourself in the foot, no matter how tempting it can be.
Million Dollar Idea: Emotional Investing Support Group. We show up, explain our concerns, and then an old nun smacks us with a ruler & makes us write investing fundamentals on a chalkboard - Bart Simpson style. Now there's an idea I'd join!
Stay the course, keep cool, and let's win the long game together.
See you next week,
See you next week,
Whenever you're ready, there are 2 other ways we can help you:
Opulus Method Digital Course: Join 350+ students inside the Opulus Method. In just 90 minutes, learn a proven system to secure your financial freedom without sacrificing your lifestyle.
Join Opulus as a Client: We'll join forces to create a personal financial plan and investment strategy to secure your financial future. Let us handle the complex details. Go ahead and enjoy your life.
Opulus, LLC (“Opulus”) is a registered investment advisor in Pennsylvania and other jurisdictions where exempted. Registration as an investment advisor does not imply any specific level of skill or training.
The content of this newsletter is for informational purposes only and does not constitute financial, tax, legal, or accounting advice. It is not an offer or solicitation to buy or sell any securities or investments, nor does it endorse any specific company, security, or investment strategy. Readers should not rely on this content as the sole basis for any investment or financial decisions.
Past performance is not indicative of future results. Investing involves risks, including the potential loss of principal. There is no guarantee that any investment strategies discussed will result in profits or avoid losses.
All information is provided "as-is" without any warranties, express or implied. Opulus does not warrant the accuracy, completeness, or reliability of the information presented. Opinions expressed are those of the authors, Ryan Greiser and Francis Walsh, and are subject to change without notice.
Opulus is not responsible for any errors or omissions, nor for any direct, indirect, or consequential damages resulting from the use or reliance on this information. Use of the content is at your own risk. This content is not intended as an offer or solicitation in any jurisdiction where such an offer or solicitation would be illegal.