May 9


This is the Moment of Truth

Family Update

We took the puppy to the beach and he loved it.  My wife is a beach fanatic, and now she has a little friend to share it with.  I just get hot and crabby.

He actually got in the water and came out looking like a sandy, drowned rat.  His fur is so poofy you forget that there is a little puppy body underneath.

Some tension has developed in the household.  Everyone wants the cats to sleep in their room. They are so affectionate.  They lick your face like a dog. I've heard people say that a rag doll cat is a puppy in a cat's body.

Dave Lennon, a financial advisor, sat down with his morning coffee to peruse the news. Hmmm, he thought, the markets were down again yesterday. The S&P is down over 10% this year. I sure hope my clients aren’t worrying.  

As soon as he got to the office, several messages were lying on his desk. Dave thought to himself, it looks like some people need some reassurance. I can understand why. It’s no fun to see your account value go down. A lot of people’s accounts have grown so much in the last year, that a loss of 10% is a huge number.  

Saying "'l lost $100,000’ sounds a lot worse than 'I lost ten percent'” he thought to himself.

So he made his first call. 

“Hi Nancy,” Dave said. “I have a message here that says you need to talk.”

“Thanks for getting back to me so quickly,” she replied. “I read all your emails and I read your book, but I just can’t handle this. I don’t have time for the account to go back up.”

“What do you mean?” Dave asked. “ You are only sixty-five. You have plenty of time to make it up. A ‘correction’ means that the market has dropped by 10-20%. This happens once every two years or so. Nothing out of the ordinary at all. We’ve become used to our investments going up and up month after month over the past few years. It usually doesn’t work that way.”

“I can point you to all kinds of history,” Dave said. “But the bottom line is: volatility happens. The markets temporarily go down but permanently go up.”

Nancy wasn’t convinced. “What about the situation in Russia? What about inflation? These are unprecedented times.”

Dave looked Nancy in the eyes. “Nancy,” he said. “This is the moment of truth. These are the times many people make poor, emotionally charged, decisions. For our plan to work over the long term you can’t panic.”

Dave continued, “If between now and the end of your life the stock market does not return around 10% it would be the first time in economic history.”

I really feel for Nancy, Dave thought to himself.  I can feel the anxiety in her voice. It is so upsetting to me. Retirees should not have to deal with this kind of stress. How can I convince her to ignore both her statements and investment returns?  

“Nancy, I have a story for you,” Dave said.  

“The year is 1995 and you retire with $100,000 to invest. With that $100,000, you place 30 percent in bonds and 70 percent in stocks. You then decide to start taking out $5,000 a year from your $100,000 investment.

You decide to go live on a secluded island in the Caribbean. The island you choose has no internet, TV, radio, or newspapers. In fact, you have absolutely no idea what is happening in the outside world.

For 25 years you stay there, enjoying your tropical ‘off-the-grid’ lifestyle. The only connection you have to the outside world is that each year $5,000 shows up in your Bahamian bank account from your initial $100,000 investment.

In July of 2021, you return to the United States for the first time in 25 years. I am using this specific time period on purpose. In hindsight, those were a rough 25 years in the economy.

Remember, in this time-traveling example, you have no idea what is happening to the world economy. You don’t know that the market crashed in 2001 due to an internet bubble. You don’t know that 2008 experienced one of the worst economic disasters in history.

You have never once looked at a financial statement. All you know is that over the past 25 years you have received $5,000 each year for a total of $125,000 from your investments.

You go online to check your investment account. You are more than a little nervous. Is there any money left? Your hand trembles as it clicks on the "login" button. What is the account balance remaining? Are you broke?! Should you have been keeping an eye on your portfolio, obsessively checking the stock ticker every hour over the past 25 years?

The remaining balance is $415,000

You started with $100,000. Took out $125,000. Now, you have $415,000”.

Nancy replied, “Dave, are you actually telling me I don’t have to be hyper-vigilant with my accounts? Are you saying that staying on top of my investments is unnecessary? Are you saying that I should put a good plan in place and then trust the process? Are you saying I don’t need to worry at all?”

“Yes. The ups and downs of the stock market mean absolutely nothing. In a year or two, this will just be a small blip on the radar.”

“Thank you for the reassurance. I don’t what I would do without someone like you keeping me in line,” Nancy laughed.

Dave watched Nancy leave the office. I have the best job in the world, he thought. All day, every day I get to give people peace of mind. 

It’s time to return the next call. I am on a mission to ensure that none of my clients are going to make emotional decisions. They are going to reap the reward of long-term disciplined planning and investing. 

Be Blessed,


P.S. It would mean so much to me if you share this article on Facebook.  A lot of your friends need encouragement.  Don't let them worry for no reason. 

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