Let’s start with the facts. Many market indexes are essentially at all time highs, including the Dow, the S&P 500 and the Nasdaq. We are in the second longest bull run in history. And there has been at least one recession every decade since 1850. When you add all these facts up, most people firmly believe that a market correction is overdue. So, how come most investors are not preparing for it?
I believe a big part of the answer to that question is fear. People are afraid to buck the trend and go against the grain. This can be related to a basketball analogy very well. NBA basketball hall of famer Rick Barry was one of the best free throw shooters of all time. He shot underhanded or ‘granny style’ as he insisted this way produced a softer shot which increased the probability of the ball going through the hoop.
Even though most players agreed with him, they would not be caught dead shooting this way. It makes shooters feel silly and look like a sissy. Unfortunately, many investors do the same thing with their investment strategy. They follow the trend and let their egos get in the way of making the proper adjustments, even though they know they should.
So, what about you? With markets at all time highs and way overdue for a correction, are you going to follow the trend and take the big hit when it comes? Or will you buck the trend and make the unpopular but proper moves before it’s too late? The answer to that question is vital as limiting losses and controlling drawdowns is paramount to successful wealth accumulation and a successful retirement plan.