We’re back this week with another common regret from the pooled resources of those who have actually experienced retirement. The cause of this regret? An unfortunate misconception:
Regret:
“I wish I hadn’t overestimated the returns on my investments (and counted on them).”
Ouch. Now as we probably all know, nothing is guaranteed. The portfolio that lasts is the one that is balanced and secure against the unexpected. We should also build our expectations in the same way.
We obviously sympathize with these retirees who miscalculated or assumed at a certain place in their plan, and as a result find themselves needing to adjust those plans unexpectedly. But where did this faulty information come from?
When we hear about someone overestimating returns on stock investments, the information they used to base their “plan” on usually came from one of two places. First, and commonly, a family member can steer you toward making assumptions based on older or incomplete information (such as an uncle who is using his experience from investing back in the 90’s… “Come on, it’s oil! You’re guaranteed a return of 14%!”).
Next, also very commonly, people tend to base specific choices and decisions on general principles they’ve read in recent books. Books can be great sources of general principles and tendencies. But there is no way that the information presented in books can be expected to represent the current stock situation, nor can they tell us which stock to buy at any given time. Also, the main reason the majority of financial professionals release books about investing is—you guessed it—to sell books about investing. And the message that their strategies are going to get you to the double-digit gains is a fair bit more marketable than the message that it’s complicated and nothing is guaranteed.
So what’s to be done? Well first of all, the help of a financial professional who responds to and represents your account and your situation is a great step. We’ll let you know that at Miramontes Capital, for every one of our clients’ portfolios we determine a personalized level of risk, which then informs our expectations for percentage of gain, and of course, when to take action in the event that the gains (or losses) reaches a level that requires action. Most importantly, our projections are realistic because they reflect your accounts.
This regret’s a common one, but thankfully, it’s an easy one to address. Misconceptions grow where the facts aren’t taken into consideration. Call us today to have our retirement planning professionals let you know exactly what you may expect for your portfolio into retirement.