Chapter 26
A Simple Action Plan

Take action. Develop a financial plan. Use these five steps to help you protect your investments from the next bear market:

  1. Ascertain your magic number so that you know how much money you absolutely have to protect. Include all of your expenses and sources of income when making your calculations.
  2. Develop the portfolio allocation strategy that is appropriate for your situation, your objectives, and the amount of risk that you want to take. Make sure to consider taxes, inflation, and your spending habits before figuring out the rate of return you need to earn on your money.
  3. Plan to regularly rebalance your portfolio over time. Controlling risk and maintaining the risk profile that is appropriate for you is always important.
  4. Determine your sell strategy so as to protect yourself from the next bear market. Everyone's situation is different. You have a different risk profile, goal, and portfolio than your neighbor. The sell strategy that works best for you will be determined by those factors.
  5. Implement your sell strategy when the time is right. If you don't feel that you have the discipline to implement your sell strategy, please seek out a financial advisor who believes in buy, hold, and sell. Remember, this plan is only as good as its execution.