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What People Don’t Know about the Power of Wealth Preservation

Posted on | October 19, 2008

Having trouble sleeping these days? You’re not alone.

The week of October 6 – 10 proved to be one of the worst downturns in the stock market in American history. The following Monday, October 13, the market bounced back, realizing a more than 11 percent increase in one single day!

What volatile times we live in, and everyone is talking about it!

During the last few weeks of market turmoil, I was speaking to audiences in Chicago, Illinois; and Miami, Florida; and the Los Angeles, California, area.

I could see it for myself: People across America were feeling confused, isolated and powerless about their finances — especially if they had money invested in the market.

I heard many people exclaim they and/or their friends had panicked during the horrible downturn and had sold their stocks and mutual fund shares — thus locking in their losses.

When the market rebounded on Monday, they were left out and missed an 11 percent one-day upsurge. When things like this happen, remember two things: 1) Don’t follow the herd, and 2) Don’t pay attention to media reports on the herd, because the media is part of the herd.

I am grateful to feel calm during turbulent times. How can anyone feel calm at a time like this, you might ask?! Because of what I know, and what I can share, which gives others:

  1. Direction, so they don’t have to feel confused
  2. Confidence, so they don’t have to feel isolated in their circumstances
  3. Capability, so they don’t have to feel so powerless

Most people don’t know that investing directly in the market isn’t necessarily the best way to create and preserve wealth.

Many people don’t understand that when you have money in the market, a 25 percent loss needs to be followed by a 33 percent gain to come back to a break-even point ($100,000 dropping by 25 percent to $75,000 needs to then experience a 33 percent gain on $75,000 to come back to $100,000).

Likewise, a 50 percent loss needs to be followed by a 100 percent gain to come back to a break-even point.

Both the real estate and stock market are like a person with a yo-yo walking up stairs—the overall market will generally go up over the long-run, but it will experience many ups and downs in the short-run.

What if there were a better way? Please check in next week for the final piece of this blog.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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