Win By Not Losing

If you have a dollar and lose $0.25 you’re left with $0.75. You’ve lost 25% of what you had, but to get back to $1.00, you’ll have to generate 33% of what you have now. To get it back you could go to work or you could hope the market helps you out. In real life when a husband and wife watch their portfolio go from $1 million to $750,000, they get out of the market. It’s too painful to watch. That tends to make their losses even worse because they lose the power of compounding. There’s a better way—it’s counterbalancing.

As you can see in the following charts, counterbalancing helps you win by not losing. Last week’s pull back in the stock market was a good week for 10-Year Treasuries. The same is true year-to-date 2014, and again it’s true going all the way back through the real estate crash to before the tech bust. Counterbalancing works. And I expect it to work during the next pull back. Discuss this with your spouse and develop a plan for counterbalancing your portfolio because often these discussions take place only after it’s too late.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.

E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.