Football season has arrived. I suspect few activities generate higher emotions than a football game. The world may be in turmoil all around them, yet nothing seems to matter more to the fans than another touchdown.
Investors also tend to get caught up in emotions. One of those emotions is the sense of our own mortality and the feeling that as we get closer to the end of our lives, we become more fearful of making investing mistakes. I find this very comparable to a strategy common in football games, a strategy which I despise by the way, known as the “prevent defense.”
In the remaining minutes of the game, the team with the lead often changes their defensive strategy from one of trying to stop the opponent from moving the ball, to simply trying to avoid a big touchdown play. They pull the defenders way back to prevent a big pass, and in the process give up very easy short passes. I have watched countless games where a team that has successfully held their opponent all game long, moves to a prevent-defense, and ends up losing the game in the final seconds. The team that is behind takes advantage of the natural weakness of the prevent-defense and quickly moves the ball downfield for the score.
I question why a coach, whose defense has been successful at holding their opponent for 58 minutes, would suddenly stop doing what was working and change to a different, and clearly weaker, defensive strategy for the final two minutes.
As investors age, they are often tempted to employ a similar type of financial prevent-defense. Fearful of making a mistake, they stop doing what has brought them success all the decades of their lives, and move to a defensive stance hoping to prevent a big loss.
The problem with the prevent-defense in football is that it yields control of the game, and the all-important clock, to your opponent, at a time when control is the most critical. The same tactic in investing turns control of your investing future over to outside sources, such as your life clock, at a time when control is also very critical. I have seen people in their 80’s employ a financial prevent-defense thinking there was only a year or two left on their life clock, only to still be alive 15 years later. I have watched older clients live beyond their life clock and find themselves paying up to $30,000 a month for 24 hour nursing care. It’s pretty difficult to maintain that much expense on a prevent-defense.
You never know for sure when life’s buzzer is going to go off. You cannot tell what your opponent, (time, health, disaster) has in mind for you. Though it is wise in football and in life to make some adjustments throughout the game, do not be too quick to abandon what has been working for you. Otherwise you may find, as have many football coaches, that the prevent-defense strategy only prevents your own success.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 1173 S. 250 W. Suite 505, St. George, UT 84770.
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