Now Is Not the Time to Be a Creature of Habit
I’d like to share a story that I also told in my most recent book, The Retirement Income Stor-E, about a little girl who sees her mother cut off the ends of the roast before she puts it in the oven. Curious, the girl asks her mom why she does that. The mother explains, “That’s the way we’ve always done it. It’s the way your grandma did it.”
“But why?” the daughter asks. The mother replies, “To tell you the truth, I don’t know why Grandma does it, but we’re going to grandma’s house this weekend. When we get there, you can ask her.”
That weekend, they go to grandma’s house and the little girl does just that. Grandma laughs and says, “Oh honey, I haven’t done that in years. I used to do that when your mom was little because our roasting pan was so small we had to cut off the ends to make it fit.”
It turned out there was no particular benefit to cutting off the ends of the roast. It was just something this girl’s mother got accustomed to seeing her mom do during her childhood and continued to do once she grew up.
Humans are creatures of habit, and I find this to be a great metaphor that illustrates the fact that we tend to repeat our behavior, whether it really makes sense or not.
As I’ve mentioned before, many Baby Boomers first got serious about investing in the ‘80s and ‘90s, in what was the greatest bull market in U.S. history. As a result, many became accustomed, and even addicted, to the double-digit gains that became the norm. Boomers also got accustomed to rationalizing things, like ultra-high P/E ratios, since it seemed we couldn’t lose during that time.
Many rationalized it until it blew up in their faces — not once, but twice. Even after the two major crashes that started in 2000 and 2007, many Baby Boomers remain overexposed to stock market risk—whether it makes sense or not.
Although the stock market has managed to recover a good chunk of the losses it experienced in March, I believe things could get worse before they get better. For anyone who is retired or within 10 years of retirement, the market’s recent run provides a great opportunity to recalibrate and take some risk off of the table.
If you would like to learn more about the best ways to reduce your exposure to stock market risk, visit theretirementincomestore.com to find an Income Specialist in your area who would be happy to help you out.
If you liked the story I just shared, make sure to check out The Retirement Income Stor-E which is available on Amazon.com.