Most Americans are not aware of the high risk they are taking with their retirement account.  In this story, see how Kathy used these 5 questions to reduce risk and take control of her retirement account.

In 1999, Kathy had just turned 40 years old. She had built a solid career and was able to afford a good standard of living and most of the things a mother desires for her children. One of Kathy’s proudest achievements was the growth of her retirement account, which had enjoyed some strong gains over the previous 5 years. She was finally feeling like all the hard work and sacrifice was starting to pay off.

In 2000, the dot com bubble burst, cutting her retirement account almost in half. She immediately began to worry about her retirement and although she tried not to think about it, the anxiety began to take a toll at work and home.

It took seven years before her account had recovered those losses and Kathy was able to breathe again.  Although she felt like she had been set back seven years, at least her account was back up to where it was before the crash.  We all know what happened next…

In October 2007, the roller coaster plunged again. Kathy had the worst financial year of her life in 2008. She was almost 50 by this time and could hardly face how far the crash had set her back. She began to consider the possibility of having to work through retirement, but hoped the markets would turn around and she could recover the losses again.

It took almost ten years this time, before her retirement account had recovered the losses from the crash.  She actually began enjoying some nice growth again, but she was extremely nervous about the roller coaster and knew she couldn’t survive another plunge downward.

So, in 2017 Kathy decided to take matters into her own hands. She stopped relying on the mainstream financial system and started looking at her investments through a different lens. A lens that allowed her to stress test her retirement strategy and direct it in a better direction.  Now she has positioned her retirement account so it can grow with predictability. Her new strategy has allowed her to get off the roller coaster and finally rest easy about her retirement.

What did Kathy do? How did she get off the roller coaster?  And how can others follow her lead to more predictable investments?

5 Questions for Retirement Investments

Kathy’s goal was to find an investment strategy that would grow at a similar pace to the stock market while insulating her from downside risk. She used the following 5 questions to analyze her investment strategy, and others can do the same.

Beware, these questions will require you to take off your rose-colored glasses and “get real” with yourself about your investment strategy.

QUESTION #1: If the markets started a downward trend tomorrow, would you likely lose money?

Assume everything crashes: the economy, the stock market, the real estate market, commodities, etc. Given those widespread dire circumstances, how would your investments perform?  Would you lose money?  The point here is to “get real” with the risks your investments are exposed to and be honest about the potential for losses.

QUESTION #2: Are your investments insulated from losses?

Similar to gambling, most investments are exposed to the risks of speculation and you’ll only make money when the market goes your way.  When the market shifts, investments are exposed to significant downside risk or in some cases, a total loss of investment.

Kathy’s favorite investment, however, is designed to preserve wealth through the ups-and-downs in the markets.

QUESTION #3: In the midst of the conditions above, would your investments actually make money?

Believe it or not, Kathy found an investment strategy that can perform, even in the worst markets.  It is not, however, a traditional Wall Street investment, and most people simply have not been exposed to this kind of investment alternative.

QUESTION #4: Will the asset behind your investment still be there, regardless of what happens?

Remember Enron? Kathy does. She invested at a time when Enron was hot, and she learned the hard way that some investments can completely evaporate.

Rest assured though, Kathy’s favorite investment will be around regardless of market conditions, with the ability to perform in good times and bad.

QUESTION #5: Do you trust where your retirement is invested?

Here’s where you really need to take off your rose-colored glasses. Be honest with yourself and avoid burying your head in the sand.  Do you like who is watching over your retirement investments? Do you know where your money is invested right now? Have you done research on the companies whose stock you own? Do you know the owners of those companies personally?

Don’t feel bad if you answered “no” to those questions. Kathy couldn’t say “yes” to them either, but that provided a starting point for her to consider a different direction.

Kathy’s favorite investments are extremely transparent, where she knows the business owners, their strategy, and their personalities. She has a direct line to them if she needs it.

Most people don’t own Kathy’s favorite investment because they simply don’t know it exists.

Consider All Your Options

Regardless of where your current investments are, you have more options than you may be aware of.  Traditional advisory resources simply cannot offer the kind of investments Kathy discovered, and are not likely to refer clients toward alternatives.

The intent of this article is not to bash mainstream investments. We all know the stock market has created significant returns over the last decade. But, as Kathy experienced in 2000 and 2008, when the market crashes, all those gains can evaporate quickly, and losses can occur, creating long periods of misery for investors.

The real secret is to keep all the gains you’ve made and insulate yourself from any future market volatility. Kathy learned what smart investors know: enjoy the ride but know when to get off the roller coaster.

4 Key Characteristics of Kathy’s Favorite Investment

You can get off the ride by looking for investments that have these 4 characteristics:

  • Insulated from Downside Risk – The best investments can insulate you from downside risk if economic and market conditions turn sour.
  • Growth That Outpaces Inflation – Inflation historically grows at a rate of 3-4%. The best investments can keep pace with or grow faster than that. This eliminates CDs and most other low-risk investments.
  • Earn a Strong Dividend – This is why you invest! You should be confident that your return will be consistent, year after year, regardless of market cycles.
  • A Great Experience – One of the most overlooked characteristics of a great investment is the comfort you gain knowing your investments are in good hands. This allows you to sleep at night.

Kathy, like all smart investors, has positioned her retirement for the long-term by investing in a strategy that eliminates the roller coaster. Learn more about Kathy’s favorite investment.

This content is the perspective of the author and is not intended to be relied upon as a forecast, recommendation or investment advice, and is not an offer or solicitation to buy any securities or to adopt any investment strategy. The information and opinions contained in this content are derived from experience, historic data, and other sources deemed to be reliable, are as of the date of this content, and may change as subsequent conditions vary.

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