i've been experiencing something new whenever i visit my investment advisors. Usually, i am not in the reception area alone, and there are typically a few of, what look like to be, fellow account holders with the financial institution. As i wait for my advisor (he's older and slower than most...) i see a few more of these people coming and going, sitting and shuffling.
This initself is nothing new. What is new is their expression. The furrowed brows, the wringing hands, the tapping toes. These people are feeling desperate. if you began your investing career with the goal of a seven-figure portolio, if you were reaching retirement just as you seemed destined to reach that goal, only to lose half.....
I hate to say this, but seeing these people suffer- if only in my head and for a brief moment-brings a great deal of satisfaction. Knowing that i was not jealous when these same people likely bragged of a 15% return on their foreign exchange mutual fund. never mind that their advisor-recommended hedge fund, which charged a m.e.r. of 25% of all earnings and 3% of the invested assets, is now broke.
I never got interested in the products they used to brag about. i never minded when people looked at me like i was the most conservative person they'd ever met when i told them i hold no more than 10% of my assets in equities. For me, the knowledge that bull market, or bear market, i would still earn my steady, approx. 5% return AFTER TAXES AND FEES has always helped me sleep at night. if i make 4.5%, if i make 6.5%- that's the way the economic cycles will go and (if the world economy doesn't totally collapse) i will always able to plan and live without spending any captial.
my satisfaction comes not from the losses that these people have suffered, but from the verification of the knowledge which i always hoped to be true in a situation like the current economic meltdown: proper investing means dealing with neither the exuberant and lucrative gains nor the crippling and impoverishing losses. If you really did your homework as an investor, like i did, you would have NOT LOST A SINGLE PENNY DURING THIS RECENT MELTDOWN!!!! In fact, i still consider things to be business as usual. Is that valuable information to you? to me it's priceless.
i say this because it's important to understand that yield is not necessarily tied to risk. the appropriateness of your investment to your investment needs is the crucial factor in understanding how to invest your money and avoid taking a 50% loss of your net-worth (like the weary-eyed waiting-room people at my financial instiution). It is also necessary to understand this same point about yield and risk when discussing the previously posted "bond" vs "stock" portfolio.