A new story from Ric Edelman


Your financial plan and your financial plan is based on your financial goals so I want to ask you what are now for most folks their goal is to retire at a certain age and have a certain income for the rest of their life that's the goal your investment strategy is designed to help you achieve that goal so let me just friends for you because not a fascinating conversation with a client earlier this week he's sixty five years old half a million dollars in investments a hundred thousand dollars in cash gets three grand a month in tax free income it's disability payments three grand tax free income his monthly spending is only five grand so he only needs two grand a month beyond his income to support himself and he's got five under Graham investments another hundred grand in cash another words this point is a great financial condition but he's got an investment portfolio and asset allocation eighty twenty eighty percent in stocks only twenty percent bombs and he called thing that our nation is going to go into a depression and he's fearful that the stock market will tank and he's going to lose a lot of money and he's having sleepless nights and so on and so forth now he wasn't sleepless about it if he was remaining as confident as ever about the long term success of our nation and therefore the stock market and then in long run its portfolio would do just fine we wouldn't be having this conversation but he's panicking and he's fearful now ordinarily I would say look if you've got a long term time horizon and you've got the stomach to be able to tolerate the volatility hang in there in the long run it'll be fine but on the other hand thinking wait a minute let's look at the financial plan let's look at your goals I'm just asking a simple question if the stock market were to double in value you're half a million dollars grew to a million would that change your lifestyle when he said no because my lifestyle is what it is I'm comfortable and happy and that is you know would not improve my lifestyle would not you know hamburgers don't get twice as that can cars don't get twice as fast so his going from half a million to a million wouldn't improve his life but then I said wait a minute turn it the other way around what if something horrible happens in your investments fall by half the five hundred grand falls to two fifty could that have a negative impact on your lifestyle he said absolutely my financial security could be threatened therefore I said why are you in an eighty twenty portfolio why are you taking as much risk as you're taking and the logic of that made perfect sense and I hope it makes perfect sense for you I want you yes to recognize this as a buying opportunity but I don't want you to be rash I want you to recognize that your investment portfolio should reflect your goals otherwise you're just playing on greed by thinking well it's a.

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