In 2007 I was deployed to Fallujah, Iraq and had the opportunity to be part of a targeting unit where our mission was to target high-value individuals (HVI) resulting in either capture or kill. During that tour I sat in numerous briefings with high ranking military officials and not once did I ever hear a general or battle field commander say, “We can afford to take risk on this operation in order to capture/kill this HVI.” Never was it mentioned that losing a soldier or Marine was acceptable, I don’t even think it was thought of, it simply wasn’t an option. Deep down in our hearts we knew it was a possibility but we never spoke about it because accepting losses would mean defeat.
TSP Retirement Funds Are Vital
Some people might say comparing investments to war is ludicrous and losing money is nowhere near as devastating as losing a human life and without hesitation I agree with you in literal terms. However, I can figuratively make this debate because the majority of investors have a problem with long term thinking. These investors need to start viewing their investments as life because:
- Without money you cannot eat
- Without money you have no place to live
- Without money you have no medical treatment
These are three core pillars that need to be considered in relation to retirement. Therefore you cannot afford to “take risk” and you cannot “afford” to lose money because once you accept this concept of losing money you are more likely to continue losing money. The point I want to drive home is this… In the business of investing there will always be risk that’s a given but never should you ever accept losses.
Thrift Savings Plan Risk Vs Investment Reward
Think about it for a moment, we were searching for high value individuals, individuals who had been causing absolute havoc in our are of responsibility (AOR). But we wanted to be as certain as possible the target was in the house we were going in. What sense would it have made kicking in 10 doors based off of mediocre intelligence when we could wait for solid intelligence then kick in one door? The amount of risk you put your men at each time they go through a door is substantial. I understood there would always be risk, it was simply the nature of our profession but my goal was to limit that risk as much as possible while completing our mission.
It seems that more and more financial professionals are finding it acceptable to take “more risk” for their younger clients. When I hear the phrase “You’re young and can afford to take more risk” the hair on the back of my neck stands up. It literally infuriates me because it sets the tone for failure. It conditions your mind to accept failure in your investments. It is never okay to lose money and quite frankly that statement is nothing more than marketing garbage. I want you to sit back and think about it for a minute, why in the world would you expose yourself to more risk ever?! I know the adage goes “more risk more reward” but I personally prefer low hanging fruit.
Be Cautious Of Sales Pitches
To be blunt and you can take it for what it’s worth the financial industry is an $8 trillion a year business and these marketing professionals have paid millions of dollars to find out what actually makes individuals buy or sell a security. They have figured out what emotions trigger a potential customer to reach into his or her wallet and make the decision to purchase a security/fund. A lot of these marketing pitfalls can be avoided if you simply use commonsense. I’m well aware that initially you’ll wonder if you’re crazy because everyone around you will be doing the exact opposite but I assure you that you are the only sane person in the room. This concept is called contrarian investing.
The statement you can afford to be risky has never rung true during my life experience. Telling a young man/woman they can eat whatever they want while their young because they have higher metabolisms sounds like practical advice, but what type of habits does that start to promote at their young age? It develops a pattern of unhealthy eating and practices? How much harder is it going to be for them to break those habits in their later years when they’ve been accustomed to a certain lifestyle for a long period of time? Ask yourself what makes sense then take a look at all the facts before making a decision with your TSP strategy. In the world of investing you want to eliminate as much risk as possible while focusing on making returns.
Here’s to our Wealth!