Maggie and Sam called my office last week, and I could hear the desperation in their voices. They’ve lost more than $1 million in the stock market since 2000 by “investing conservatively.” Their broker assures them that buying high-quality mutual funds and holding onto them through rough markets will grow their money safely. Yet they can plainly see it isn’t working. In fact, they’ve watched a serious decline for a while now, and they’re starting to panic.
Their problem is not earning money to fund their retirement dreams. Both Maggie and Sam are smart and successful: She is a heart surgeon and he is a well-heeled attorney. Yet they’ve lost a fortune, and they can see that no matter how much they earn, it can’t possibly offset the damage done by listening to the advice of their broker, so they’ve turned to me to stop the bleeding.
These two aren’t the only intelligent, affluent investors I’ve met who are frustrated and frightened by their investment results, and 2000 wasn’t the only bear market investors had to face. Based on 60 years of evidence, a bear market ravages investors every 3.3 years, and the average loss is 27%. That’s enough to scare anyone. According to AARP, 35% of all retirees go back to work after they retire. Could it be because the market cracks and scrambles their nest eggs?
I’m reminded of my Uncle Jim, who wouldn’t listen to me and retired in 1999 with $700,000. His plan was to create income from his retirement package and to live happily ever after. Interest rates were too low for Jim, so he decided to invest in growth mutual funds to create the income he wanted. By the end of 2002, his $700,000 had dropped to less than $400,000 thanks to an inhospitable market. His savings had lost 43% of its value. Then, instead of $700,000 working for him, he had $400,000 working for him. That meant less income–a lot less income. Faced with this disturbing reality, Jim sold his beautiful home to buy a small condo and had to go back to work. Jim didn’t have 70 years to “think long-term” as his broker and other financial “experts” suggested he should. Jim needed that income today.
What can Jim, Sam, Maggie and everyone else do to protect themselves from catastrophic loss in the future? Since we know that a crash comes every 3.3 years on average and the typical loss is over 27%, it is critical for investors to invest only when the risks of doing so are relatively low.
Of course whenever you invest in the stock market you take on risk. However, we know that certain times are riskier than others. Just as you check the weather forecast before you embark on a road trip, I’m suggesting that you check the market’s temperature before you hit the financial road.
There are a number of ways you can do this. The method I like best is watching the major indices, such as the Dow, S&P 500 and the NASDQ. Here are the specific steps:
1. I look for days when the volume explodes. For example, if the DOW trades 2 billion shares on average, and today the DOW trades 2.2 billion shares, that is a significant increase in shares.
2. When that happens, I pay attention to what happens to the price of the index. Continuing our example, if the DOW closes higher today to boot, I know that large institutions are falling over themselves trying to buy shares, which means prices are moving up.
3. We know that one sign of a healthy market is a big increase in shares traded, coupled with the index moving higher. In fact, there has never been a bull market stampede without a big increase in trading along with an increase in the index price. If I see two or more of these strong days, I’m more prone to invest.
I strongly suggest that you watch the major indices for clues on the market’s health before you invest. I’ll be providing more specific tips on how you can “take the market’s temperature” next month, most notably how you know when it’s time to stop holding and sell.
Neal Frankle is the author of Why Smart People Lose a Fortune: 5 Steps to Restoring Your Wealth and Sanity. He helps affluent clients establish and implement a safety-net strategy to protect their wealth. He also helps other professionals, such as CPAs, to do the same thing for their clients. To contact him, send e-mail to Neal@WealthResourcesGroup.com.
Neal Frankle
(818) 621-2556 (mobile)
(818) 716-3100 (office)
neal@wealthresourcesgroup.com
Stevens-Johnson Syndrome, or SJS, is a painful and debilitating skin condition frequently caused by an allergic reaction to a drug, chemical, or disease. One of the most common triggers for this reaction is the compound sulfonamide, a common element in many drugs including antibiotics, barbiturates, sulfa drugs, certain Non-Steroidal Anti-Inflammatory Drugs such as the COX-2 Inhibitors Bextra and Celebrex, and Ibuprofen found in Advil and Motrin. Other factors that can result in SJS are the herpes virus, mumps, influenza (the Flu), and the Epstein-Bar virus.
Doctors term the initial stages of SJS erythema multiforme. The disease begins as several concentric circle skin rashes or lesions, often found on the fingers or hands. These lesions begin to spread throughout arms and legs, and as they progress they begin to cause blisters throughout the skin. Many people also report severe itching, especially when the rash spreads over more of the body. In severe cases, SJS will irritate blood vessels and mucous membranes under the skin which can result in the skin shedding or “sloughing” off. When SJS occurs over more than 30% of the body, doctors describe it as a more intense condition called Toxic Epidermal Necrolysis Syndrome. TENS, as it is called in the medical community, is a serious medical condition that is potentially fatal if left unchecked. SJS and TENS can also spread to internal organs such as the lungs, kidneys, and liver.
Treating Stevens-Johnson Syndrome often requires extensive recovery in a burn treatment center or similar facility. The complications of SJS often resemble severe second degree burns, and as the body sheds the skin it becomes susceptible to dangerous and potentially fatal infections. SJS can also spread to the eyes, genitals, or mouth, where it can cause extensive scarring, excruciating pain, blindness, and even death.
A number of popular medications have been accused of causing SJS in a number of innocent people. Advil and Children’s Motrin in particular have been linked to severe cases of SJS in young children who will have their lives forever changed due to the negligence and lack of foresight on the part of drug manufacturers. In fact, a seven year old girl who took Children’s Motrin suffered an SJS-related allergic reaction so severe that it spread throughout her body and finally invaded her eyes, causing irreversible blindness. At the time of the incident, there was no warning on the packaging of Children’s Motrin to warn parents of the potential danger to their children.
Part of the tragedy of Stevens-Johnson Syndrome is that statistics and figures on this potentially deadly disease are extremely difficult to determine because most cases go unreported. The Food and Drug Administration does not require that manufacturers or doctors report such drug reactions, so the consuming public and even some doctors are unaware of the risks these drugs pose. Furthermore, the COX-2 drugs Bextra and Celebrex are know to contain sulfonamides, which can result in SJS or TENS in people sensitive to the chemical. In fact, the FDA cited SJS as one of the main reasons it removed Bextra from the market.
To learn more about Stevens-Johnson Syndrome or for information about hiring a SJS lawyer, please visit our website at http://www.resource4sjs.com This article may be freely reprinted as long as this resource box is included and all links stay intact as hyperlinks.
Delivering great employee performance is quite a skill, some might say an art. You could do far worse than to invest in this great little book, which is a delightful read
In this early book from Ken Blanchard, he is able, through a very precise focus on what makes leaders (and, I think in this case, managers), get the very best from those they employ, to describe a simple process for success.
For many, ‘The One Minute Manager‘ is a revelation and I have no doubt that it works. In my long management career, I was able to achieve this goal eventually, but it is, inevitably, easier to read than deliver. This is because, like most things, it requires practice and focus. And if any manager were able to do these things easily, they would be already.
That being said, it’s a great aspirational (and inspirational) book, focused on delivering, through people, great success in business and organisations.
Rather than trying to do it all yourself and either failing, or burning yourself out in the process (tried it myself - once!).
Because of that, it is a very useful read for anyone who wants to make management a career.
I especially like the simplicity of The One Minute Manager, a feature I have included often in the ideas and tips on my own website, detailed below.
© 2005-6 Martin Haworth is a Business and Management Coach. He works worldwide, mainly by phone, with small business owners, managers and corporate leaders. He has hundreds of hints, tips and ideas at his website, http://www.coaching-businesses-to-success.com.
…helping you, to help your people, to help your business grow…