When I retired early in 2007, the stock market made the future look bright. We were about 80% invested in equities. I expected our investments to perform extremely well. Instead, the 08/09 bear market reduced are retirement account by 44%, which was catastrophic. We spent until late 2013 clawing our savings back to the 2007 levels. It was a very challenging time.
Fast forward 10 years to 2017. Again, the stock market is making the future look bright. However, this time I am much less optimistic and more cautious about our investments. We can't afford another downturn of 44% in our retirement savings. I no longer have the wherewithal nor stamina to withstand the decline and make the subsequent recovery.
So, I am consciously not adding any additional funds to equities, and taking profits in specific positions, where possible. Still, we are not exiting the stock market, but targeting for only 25% exposure to equites. That way a 50% decline will only result in a 12.5% decline in our retirement savings.
A 12.5% decline, while not desirable, will be challenge that is not insurmountable.
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This is not financial advice. Please consult a professional advisor.
Copyright © 2017 Achievement Catalyst, LLC
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