It’s something that gets mixed responses when we talk to our clients. And from across the world people have weighed in on the subject.
The answer was…. that it depends.
Well what do we mean by that? Well one train of thought is that if you haven’t made peace with your loss, then you’re likely to accept gambles that would be unacceptable to you otherwise. Or in other words, if you lose money, but don’t accept that you’ve lost that money, you’ll make dangerous bets to get it back.
The other is that after losses lead to decreased risk-taking, or in other words, if you lose something you’ll be more focused on not losing anything more.
So how do you know which one you fall under?
For the most part, if it’s on paper, aka the quarterly or annual statement, then you’re more likely thinking that you’ll get it back. Or the first train of thought.
But if you’re taking money out of it, or in retirement, then you’re probably in the second train of thought. And don’t want to lose anymore.
So what’s our answer?
Our answer is that people have to be able to understand their positions. The market should not be something feared, and even if we don’t know if it’ll drop or rise, staying out of the market will only make your retirement a more daunting task.
There will always be winners and losers in a market. But you can’t just give up when you’ve lost and you can’t always be as carefree when you win. There is a middle ground that you have to have as you near retirement.
Unwilling to accept failure is an easy way to destroy everything that you’ve built up. But being too cautious will do the same thing to you as well. Doubling down, by either going more risky or being to safe will destroy any recovery efforts that can be made to your account.
Our lesson for many of you out there is to understand that there will always be good and bad, but you should view it from a neutral perspective than an emotional one.