In July of 1914, the Austro-Hungarian Empire invaded
Avoid huge bets where the probabilities of failure are unknown. Recently a young client considered a business proposition involving a vacant lot. For several reasons buying another piece of property was a big gamble. Anything with a 401K loan is fraught with peril. More importantly on the personal front the proposal was even more risky. Money can be replaced, marriages not so easy.
Reeves points out how the folly of short term thinking can lead to disaster. In 1914,
With the stock market setting new records investors should never forget a catastrophe can derail retirement plans. If your plan depends on eight percent returns like many pension plans do (hello, South Walton Fire District) or 10 percent returns like Dave Ramsey touts, both of these are far from certain. You won’t get a do-over on retirement, it’s one and done. Not only did World War One cause the Austro-Hungarian Empire’s demise, the German and Russian Empires met a similar fate.
Market risk (systemic as the academics say) can be diversified somewhat by using different asset classes and having a long term horizon. But systemic risk cannot be avoided. Outlying events, so rare they have a special name, black swans, are hard to predict and can decimate your portfolio. It’s important, even with lofty stock prices, to keep some money out of stocks. From August 1914 to December 1914, the New York Stock Exchange closed. Good luck getting your money out.
According to family lore, Great-Granddaddy Hodges made $100,000 selling corn in 1914 ($1.9 million in today’s dollars). He was a sawmill/turpentine operator but with
Even though Buz Livingston is a fee-only certified financial planner this should not be considered personal advice. For specific advice visit us online at livingstonfinancial.net or at our new office in