• Darryl Rosen

When Unrealized Gains Turn To Realized Losses

We had a day of reckoning recently in the Rosen household.

Frankly, it was a long time coming, and I had resisted. I didn’t want to go there. I didn’t want to stir the pot in such a dramatic way, but finally, I put my foot down and said, “No more!”

I told the boys they could no longer use my Starbucks card.

I know, it’s terrible, but before you call the authorities, let me explain.

At the time of this writing, Josh is 23 and gainfully employed as an airline pilot. He still asks me to pay for everything, but I think he’s just trying to push my buttons. It’s working.

Danny is 21. He’s had some nice internships and has plenty of money for Starbucks. Ben, 16, makes more money than a kid his age should selling mobile apps.

I didn’t cut their privileges because of money. Rather, it was the principle.

See, they wouldn’t pay for any of their often multiple trips per day to Starbucks, nor would they buy me anything when they went.

“We’re saving,” they would say. All the while, I’m thinking “Me too! I’m saving for retirement.” And through it all, I saw something I didn’t like: greed.

If only they had used their own funds here and there, perhaps I would have felt differently. But I felt they were being greedy, and it upset me.

So, I put my foot down. (Postscript: They’re using the Keurig now, which I bought, so go figure!)

Unfortunately, in my role as a retirement strategist, I run into greed a fair bit.

From my friends at realinvestmentadvice.com:

“Greed causes investors to lose more money investing than any other emotion.

The human emotion of ‘greed’ leads to ‘confirmation bias’ where individuals become blinded to contrary evidence leading them to overstay their welcome.

Individuals regularly fall prey to the notion that if they ‘sell’ a position to realize a ‘profit’ that they may be ‘missing out’ on further gains. This mentality has a long and depressing history of turning unrealized gains into realized losses as the investment eventually plummets back to earth.

It is important to remember that the primary tenant of investing is to ‘buy low’ and ‘sell high.’ While this seems completely logical, it is emotionally impossible to achieve. It is ‘greed’ that keeps us from selling high, and ‘fear’ that keeps us from buying low. In the end, we are only left with poor results.”

All of this takes on added importance as retirement nears.

So, here’s a few nuggets of guidance that you can take right to the nearest coffee shop. The markets are still at historically high levels. They have been for a while. There is far greater risk on the downside than there is opportunity for gains on the upside.

Set a floor on some of your retirement money. That is, if you’re 60 years of age, for example, protect 60% of your principal so that this money can never be any lower in value than it is today. As you move along in retirement, continue to raise the floor on your assets.

Don’t succumb to the fear of missing out (words that have ruined many of the best-laid retirement plans).

With proper planning and a bit of smarts when it comes to knowing when good enough is good enough, you just may have enough money for Starbucks in your golden years. (If you see the boys there, make sure they’re using their own cards!)

That’s just the way it works!

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