Buy, Hold, and Sell!

Introduction

One Bear Market Can Change Your Life Forever

How would you feel if you lost over 78 percent of your retirement investments in one bad market?

I'd been doing a weekly radio show for four years when I was asked to speak at the “Managing Your Money” conference in Arlington, Texas. After my presentation to some 4,000 attendees, I walked offstage to find a man in his late fifties waiting for me. He said, “Ken, glad to meet you. I listen to your radio show every week.”

“Thanks,” I said, shaking his hand.

“Do you know how much money I had before this last bear market?”

This was 2002. The tech bubble had recently burst. I was afraid this was going to be a sad story. “No,” I said, “how much did you have?”

“Three million dollars.”

“Wow, that's great,” I said. “Congratulations.”

“Do you know much money I have now?”

I shook my head, bracing myself.

“I have $650,000.”

I remember looking at the man. I couldn't believe he was standing, let alone smiling. “But tell me,” I said, “To go from $3 million to $650,000, you had to see your investments drop to $2.5 million, then $2 million, then one and half…There were signposts along the way. Why didn't you get off the ride?”

And he said, “I had every intention. I planned to get out if my investments ever dropped down to two and a half million. But when they went down that far, I thought to myself, ‘I'm down $500,000. I can't sell now. That'd be ridiculous.’”

I had the feeling I knew where he was going.

He continued: “So I drew a line ...