Unseen Investment Risks

A while back, I met with a high achieving 50-year-old medical device sales man, we’ll call him “Kevin.”

He reached out because in his own words, “I could use a little assistance with this stuff.”

This in and of itself is an incredible first step… realization.

As we began to walk him through our process, he continued to ask about performance.

Several times Kevin wanted to see Know My Plan’s investment performance during various market periods, at which point he would challenge our returns, citing that our portfolio was not keeping up with the market.

No problem.  I answered his challenges the best that I could.

I encouraged him to consider our process and how we determine how much of our resources we want to allocate to various asset classes (stocks, bonds, cash, etc…) and why.

Yet again – the performance questions kept coming…

Kevin:  “If we’re looking year-to-date, your recommended portfolio is up only 15%, but the NASDAQ is up 40%.  That’s more than double and I don’t want to miss out on that.”

Me:  “I understand.  Hey, let’s do this, if you don’t mind – would you mind logging into your trading account at <insert company name> and together let’s take a look at some of the investments that interest you?”

Kevin obliged.

He logged in and we found ourselves on his Investment Account Summary page.  Front and center was Total Assets:  $192,000 followed by Performance Returns (YTD): -55%.

Kevin’s current year-to-date return was -55%!!! 

He began trading in this account five years prior and his total return since inception return was -68%.

In five years, Kevin turned $600,000 into $192,000.

This is what happened, and this is how fast it can spiral.  Kevin had all the big popular names you’ve heard on CNBC.

He’d follow a company, get excited about its meteoric return, and click buy.

He quickly established a terrible habit – a process to buy at the top.

His “process” was an accident, not a process – not something built on the pillars and strong foundations of a financial plan created specifically for him, his family, and their future goals.

Not only was Kevin staring at a serious erosion of wealth, but he also had to accept the massive opportunity cost of missing out on the benefits of owning a low-cost diversified portfolio over time.

The Good News

Kevin was open to help.

Luckily, Kevin earned a very decent income, and we were able to buckle down and build back some of what had been eroded.

If we can keep Kevin on track, I believe he and his family will be okay.  They’ll still be able to pursue their most cherished goals.

But it was a painful wake-up call.

If you or someone you’re close to could use help aligning their finances and establishing a financial plan, please reach out to us, we’re accepting new clients and eager to help. 


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