Money from Heaven, Path to Hell
What the Fed is going on?!
The free-flowing money from the Fed appears to be “Money from heaven” at this point. And in some ways it absolutely is – but only if you take advantage of it personally and decide to protect yourself by locking in these “artificial” gains you’ve been given. Because this “Money from heaven” will undoubtedly become a “Path to hell.”
But it doesn’t have to. Why take unnecessary risks? “Paper gains” aren’t profits until they are realized. Millions of people are rudely reminded of this every time the stock market takes a dump. And if you’re forced to sell due to a myriad of reasons such as Required Minimum Distributions, margin calls, basic income needs, college tuition, emergencies, debt balloon payments, etc. – that’s precisely when “paper losses” suddenly become actual losses.
I know, I know, you might say, “No problem, I just won’t sell then. I’ll wait for it to come back.”
“It will come back” is not an investment strategy! It’s financial disaster. Especially as it pertains to the stock market and mutual funds, which historically have taken far longer to recover losses than in most other non-correlated investment strategies. Sorry to be the bearer of bad news: if you wait until the stock market drops, you’ve already lost. You’ll either lose by selling or lose by not selling and waiting. It’s a lose-lose proposition.
We might be tempted to rewrite the recent past as ancient history. The folks who had the majority of their money in mutual funds when they retired or were planning to retire around 2001 or 2008? Instead of taking profits when they could have and then continuing their growth in other non-correlated investments, they have spent all those years just trying to dig and claw their way out of the hole, hoping to get back to even. But “hope” is not an investment strategy either!
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