My father-in-law was raised in Palmer, Alaska just outside of Anchorage. He always wanted to show his kids his childhood home so this year he arranged to take them and their spouses on a trip to Palmer. If you have never been to Alaska, you are missing out on one of the most beautiful and inspiring places on earth.
As I was walking along the street of a lovely town in Skagway, I stopped to admire the majestic jagged peaks of Sawtooth Mountain. It was a beautiful sunny day, a rare treat in Skagway, and I was in total awe of the beauty, and the privilege of being there to enjoy it. While soaking in the experience, an older lady, clearly a tourist as well, who was walking past me, said to her husband in a frustrated voice, "The stock market is down over 85 points today and our portfolio has already lost several hundred dollars." The comment seemed so trivial I wanted to turn her around and say, "Do you see that mountain? Do you realize how privileged you are to be in this beautiful place and you are worried about the stock market?"
People work many years, saving faithfully, so that they one day may retire. In its simplest form, a retirement portfolio is designed to replace our employment income so that we may enjoy retirement. This concept has been lost on many modern investors who value their portfolio more for its size, than for the income it can produce. They call it their "nest egg" and each day they open their account to see if their egg has gotten bigger or smaller. If bigger, then the day was a success. If it has gotten smaller, it was a bad day. In so doing they create unnecessary stress and forget why they saved the money in the first place.
It may surprise many to learn that statistically, as measure by the S&P 500 index, the stock market on a daily basis is down 46% of the time, since 1950. This means that if you are a "nest egg" investor, one who measures success by whether the egg is growing or shrinking, then almost half of the time you will be going to be disappointed. No wonder so many investors are stressed.
I suspect the Skagway tourist was a "nest egg" investor, who was unable to fully enjoy her retirement because about half her days were spent agonizing over the market being down, rather than celebrating that she had saved enough money to be on a beautiful vacation in Alaska. You retirement portfolio's number one goal is to provide income so you can enjoy your retirement. If it is doing that, be grateful and quit measuring the size of that nest egg every day.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
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