Follow Keith Fitz-GeraldStart the conversation
Leave a Reply
I received an important question last week from Margaret who, at 81 years young, has a problem most members of the Total Wealth Family would love to have.
No, scratch that… a problem I am going to do my very best to make sure you have.
Proof There's Such a Thing as Good Problems
Margaret's got a quality problem.
She's built up enough wealth to live out her life in style and wants to leave a legacy for her children and grandchildren. But, like many older investors, she's worried about a market crash and concerned she has too much money in volatile gold and silver stocks.
There are a few things to think about here.
1) "Volatile" does not necessarily mean "down."
Many investors in similar situations – and older investors, in particular – often tell me that they can't handle the volatility associated with specific stocks and are worried about a crash… yet they plow into them anyway.
What they're missing is perspective.
As we have discussed many times, the markets have an upward bias over time, which means that older investors want to be thinking about growth when it comes to leaving a legacy even though the temptation is to think about preservation.
There's no doubt that stocks go up and down, so let's get that off the table.
The single biggest mistake any investor in Margaret's shoes can make is to confuse her risk tolerance over the next few years with that of her children over the next few decades.
Simply put, the runway, for lack of a better term, is much longer for younger people, which means the best thing you can do when it comes to leaving a legacy is choose stocks that prepare them for financial takeoff, not a hard landing.
Whereas older investors in your shoes, Margaret, often fear pullbacks, corrections, and even crashes, don't forget that every one of those things is an opportunity for younger investors because volatility makes "buying low and selling high" possible.
Over the longer term that includes their lifetime.
Admittedly, this isn't easy to do for the simple reason that we like to think we know better as we get older. Our lives are no longer measured by "firsts" – our first day in school, our first kiss, our first paycheck… even our first winning trade. Stress takes over as we age, and that forces us to reinterpret things as a series of threats… to our lives, to our relationships and, of course, to our financial security.
That's why we like to think we "know better" with each passing year.
But, do we?
2) Your children and grandchildren will live in a very different world.
Many investors are stuck in the past… or at least the present.
Psychologists call this "recency bias," which is a clinical term meaning that we have a built in cognitive bias towards events that have happened r…
Join the conversation. Click here to jump to comments…
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.