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Seven Steps to Financial Freedom in Retirement by Hank Parrott

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CHAPTER 5

How the Smart Money Invests

There are two times in a man’s life when he should not speculate: when he can’t afford it and when he can.

—Mark Twain

Barry was 64 and rapidly approaching retirement when he came to me last year looking for financial guidance. As with all of my clients, I went through his current assets and worked with him to determine his projected lifestyle expenses. I found that if he invested prudently, using the academically researched and proven principles I recommend, he had enough money put away to assure a very comfortable retirement for himself and his wife. I explained to Barry that these principles would assure a measurable market return with minimal risk.

This was the first Barry had heard of these principles. His previous advisers had always proclaimed their ability to beat the market by picking the best mutual funds. They believed that the money managers at these mutual fund companies knew which stocks to buy and which to avoid, explaining that they had great track records that put them in the top percentile of money managers based on their past performance. In addition to their supposed stock-picking abilities, these same managers also boasted of their ability to time the market to get better returns and avoid losses.

Barry realized that his investment results were falling short of their big claims, and that the big ups and downs in his portfolio made it increasingly difficult to stay in the market. On top of this, he was being hurt by the ...

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