The original thesis of the post seemed to me to be a discussion of seniors reactions to the December correction. The deficit and other discussions are distractions to that subject. Stocks and Bonds and returns on investment will go up and down regardless of that. If you spend your day worrying about the deficit, you are probably equally paralyzed by global warming, the seas rising and a number of things you have no control over. You are also probably spending nearly 100% of your remaining life hiding in your home, afraid to go out or get blinded by the sun.
Regarding corrections and the impact on nest eggs, retirement savings etc. The general psyche of most people is not sell as the market is rising, for fear of Missing out (FOMO), and then panic sell when there is a correction. Often times, that correction comes at a time when capital is needed, compounding the problem. Historically speaking, stocks have been outstanding investments over the long run. At the same time, we all know that in the long run we're all dead - and statistically retirees are closer to that eventuality than the general population. So, retirees have less time to react, or make up for corrections.
So what to do ? You can elect to hide all your money under a mattress, afraid that banks will fail and markets will eventually crash to the ground. Sounds like the early 1930s to me. Regardless of the size of your nest-egg, portfolio, bank account or whatever you call it, deciding what to do at this stage in your (our) life boils down to one thing. What level of risk can you tolerate to Sleep Well at Night (SWAN) ? If the December (again referring to the subject of the article) made you extremely uncomfortable, then perhaps you need to lower your FOMO and increase your SWAN investments. WARNING: When you do this, you (and your advisor professional - if you have one) WILL NOT achieve stock market returns - don;t be surprised if , when the market goes up 10%, your return is a fraction of that. Likewise, when the market corrects 5, 10 or 20%, your total portfolio value should go down a smaller percentage, or perhaps still show a small positive gain. Thats the FOMO vs SWAN tradeoff.
How can you buffer the two ? Many theories .. but if you do believe that history repeats itself, and in the long run stocks are a good investment, you can consider putting two or three years of needed money into cash and cash equivalents, a couple more years into shorter term investments (eg short maturity bonds etc), and then the rest into equities (eg stocks) that have time to weather the ups and downs that you have no control over. The key is to sleep well, because agonizing over it just accelerates the inevitability of the terminus of your long run.
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