Chapter 27
Armed with Knowledge

Buy-hold is an incomplete idea. You've suspected it all along.

But now you have the knowledge to back up that hunch. Now you're armed with the information you need to stand firm in the face of buy-hold advice. You can debunk the myths with facts. You understand the importance of a properly designed and executed exit strategy. You have an action plan. You can feel more comfortable investing, knowing that you can buy, hold, and sell.

And now you can prepare, not only for your retirement, but for the inevitable bear market(s) that will occur. You can have a sell strategy. Like the Boy Scouts, you can “be prepared;” be ready for whatever might hurt you. You can make tough decisions dispassionately, because you have an exit plan in place.

Preparation can give you peace of mind. Think of a fire drill. It's designed to give you all of the information you need to survive. It then walks you through a scenario, so that if an emergency occurs, you can proceed to an exit without panic. A sell strategy does much the same thing to protect you from a “financial fire”—a bear market.

I hope that in this book, I've made you aware that you will probably face several bear markets during your retirement. I hope that you decide to prepare for them, that you say, “This time I won't be fooled by the buy-hold myths. This time I will act. I'm going to protect my principal by creating and executing a sell strategy.”

Maybe you were one of the lucky ones who sold and made it through the last bear market relatively unscathed without an exit plan. You may look back and say that you “saw it coming,” but I believe if it wasn't a plan that kept you safe, it was luck. If you search your heart, I suspect you don't really know if you could replicate that, if you could “see it coming” again.

Luckily, you don't have to have a crystal ball. You just have to have a sell strategy to help you, and the fortitude to withstand bad buy-hold advice. I wrote this book with those ideas in mind, hoping that it would:

Alert you to the dangers of the buy-hold myth.
Give you the backbone and conviction to stand firm against the inevitable and popular buy-hold advice.
Arm you with a counter philosophy.
Help you to understand that, as a retiree, protecting your principal is more important than growth, so that you can be more comfortable erring on the conservative side of investing.
Understand the importance of a sell strategy.
Relieve any worry about outliving your investments by knowing there's a certain point you just won't go below.

More than all that, I hope that by arming you with the knowledge you need to protect your retirement, this book provides you with peace of mind, with a feeling of security in a world of volatility, risk, and economic unrest. I hope it gives you the chance to enjoy your retirement as you should—as a second childhood without parental supervision.

P.S.: What Do You Think Will Happen Next?

As you can see in the chart above, the market rose 106% leading into the dot-bomb bear market and then fell 49%. Then the market rose 101% and lost 57% in the credit crisis crash. Now the market is up 192%. What do you think will happen next? Don't you think it makes sense to protect yourself from the next bear market?