A Better Mousetrap

An excerpt from, “Discovering Hidden Treasures”
by Dan Thompson

Over the past twenty four years that I’ve been in the financial business, I’ve seen advisors doing the same thing over and over again. Buying all the way up to a crash or what is commonly called a “correction” then advising clients to remain steady, hold on, and then repeat the cycle over and over again. This past decade has been devastating.

Think about a 55 year old couple in 1999 planning to retire in 10 years. It’s now 10 years later and if they stuck to conventional or traditional financial planning they may have less than what they invested and retirement may have to be put off for years…..if ever. Their money did not grow as projected, and as a result their predicted income has to be significantly reduced and most likely will not provide sufficient income for their needs.

Risk is not all it’s cracked up to be. Looking at past performance to gauge our future, as if it even has a smidgen of use, has proven to be an ineffective way to prepare for the future. Periods of time rarely duplicate each other, yet we are lured into thinking that if over the last 10 years XYZ Mutual Fund averaged 10%, then it’s reasonable to think it may do it again. WRONG!

Too many variables change in that period of time. In fact the variables seem to change almost daily–laws, taxes, government spending, interest rates, jobs, attitudes of the public and investors, earnings, and inflation. These are but a few of the factors that can make a dramatic difference when comparing the next 10 years to the last 10 years.