Chapter 13
Investments
’Tis money that begets money.
—Thomas Fuller, M.D., 1732
This chapter offers investment suggestions tailored to the needs of an investor living with a life-challenging condition.
The chapter discusses the development of an overall investment strategy, then describes the various investment criteria the strategy uses, and finally covers available investments in terms of these criteria.
If you haven’t already done so, this is a good time to complete the Net Worth worksheet in chapter 4 so that you have an overview of your financial situation. You may also want to consider whether to involve your spouse, your significant other, and/or heirs in the decisions. In addition to considering investment strategies, you should also consider what will be left for your heirs.
Section 1. How Much Time?
Your investment strategy depends on life expectancy. The information described in chapter 3, section 4, should give you a sense of your life expectancy on a statistical basis.
Please keep in mind that statistical projections are based on the laws of large numbers and averages. Statistics, by their nature, reflect past, not future, events. Doctors can be wrong, even in the category of six months or less. Having been given a life expectancy of a few months two years ago, Sean S. is still alive.
Throughout this chapter, the discussion focuses on three different life expectancies. The time frames, and the abbreviations that will be used to identify them throughout the rest of the chapter, are
• life expectancy (LE) more than five years (LE>5);
• LE between two and five years (2<LE<5); and
• LE less than two years (LE<2).
Section 2. Personal Planning
The strategy (LE<2) (2<LE<5) (LE>5). There are certain financial goals to aim for regardless of life expectancy. These were already covered in chapter 4, but are summarized here because of their importance:
• Identify, quantify, and prioritize your financial goals.
• Develop an action plan while keeping in mind that meeting the costs associated with your illness is another goal you need to include in your overall plan. Some resources currently earmarked for growth (or some other financial goal) may have to be shifted to provide for your health needs.
• Monitor results. Strive for the following:
• disciplined, consistent implementation.
• accurate measurement through monthly and yearly income statements.
• periodic reevaluation and revision.
Section 3. Professional Advice
In considering whether to consult a financial adviser, it may help to do a quick cost/benefit assessment of the alternatives.
For the investor employing an “income strategy,” using a professional adviser may be unnecessary since the majority of investments will be in simple cash equivalents such as money market accounts. Your banker or accountant should be able to point you to the available alternatives. However, for more complex “growth strategy” investments (such as mutual funds), as well as for overall financial and investment planning purposes, using a professional adviser may be worthwhile. The chart on the following page lists the possible costs and benefits of each method.
How to select professional advisers. See chapter 36, section 7.
Section 4. Develop Your Investment Strategy
Once you have identified and prioritized your financial goals, the next thing to do is to adopt an investment strategy and stick to it.
As will be described in detail in section 5, an investment strategy is made up of investment criteria—the things you need to think about when evaluating whether a particular investment is appropriate for your needs. All investment vehicles must be evaluated with your statistical life expectancy in mind.
In planning your investment strategy, review chapters 19 through 23, which concern new uses of existing assets. In the circumstances noted, these assets can be converted into cash when needed.
Tip. Reevaluate your investment plan if your health changes significantly.
The investment strategies I suggest during each of the three periods under consideration are:
Less than two years (LE<2). Maximize available cash in case you need it. Adopt an income strategy (cash return on your investment such as dividends or interest) that maximizes liquidity (the ability to turn an asset into cash) and minimizes risk. If you need to access principal to meet your current needs, take this into account when projecting future income. If the return on an investment stays the same, but the amount of the investment decreases, the income earned on the investment will also decrease. When you consider liquid assets, don’t forget the assets described in chapters 19 to 23.
If you have the resources, you may decide to simultaneously pursue a growth strategy, which increases the dollar value of assets. A growth strategy is based on traditional long-term financial planning to meet goals such as increasing wealth, putting children through college, and estate planning.
More than two years less than five years (2<LE<5). Some combination of income and growth strategies is appropriate. The extent to which you need to access principal to meet current needs has to be taken into account in assessing potential return. It is important for investors in this category not to adopt a strategy that is too focused on the short term. You need to be prepared for the possibility that you may live longer than your current life expectancy. For you, the assets described in chapters 19 through 23 serve as supplemental investments that are available for unusual needs.
More than five years (LE>5). For those people diagnosed with a condition that could mean years of health and gainful activity, it is essential to begin an investment strategy focused on growth—with built-in liquidity—as soon as possible. Your investment plan should be somewhat less risky than that of the average person who has no health concerns—and your plan should avoid complicated investments because you need to be able to change strategies quickly. If you have to access principal when you are not earning income, keep in mind that your potential to realize interest income decreases. The assets described in chapters 19 through 23 provide supplemental investments, some of which are available for emergencies.
Section 5. Investment Criteria
To reach the optimal balance of income and growth, the most important investment criteria to consider are liquidity, risk, return, fees, taxes, and administration. No investment should be evaluated on the basis of any single criterion, but rather on how well the composite of relevant criteria support your overall investment strategy.
5.1 Liquidity
The relative liquidity of an asset is determined by its degree of marketability and flexibility. Highly liquid assets can be readily purchased or sold (marketability factors) and readily modified (flexibility factors). For example, an investment in a mutual fund would be liquid if you could sell your shares at any time you wish with no charge or penalty. The investment is highly marketable and flexible because you can increase or decrease the investment at will. On the other hand, if there is a charge for the sale, or if you are limited to investing or selling at certain times, the investment is not so liquid.
LE<2. For an investor using an income strategy, maximizing liquidity is the most important investment criterion. Ranking liquidity as the most important criterion has a direct influence on other investment criteria. For example, highly liquid investments will also be associated with lower risk, less emphasis on the need for diversification, and lower returns.
2<LE<5, LE>5. Liquidity is an important concern for anyone with a life-challenging condition, since you will always want to have access to cash for the needs associated with your condition. The longer the time that you have to work with, the less weight to be given to liquidity as compared to other considerations.
5.2 Risk
Risk refers to the possibility that your investment may decrease in value and is measured by the volatility of total returns on your investment.
Different investment classes (e.g., cash equivalents, fixed income, equity) are associated with different types and degrees of risk. Different types of risk to consider are issuer-default risk (also known as credit risk), market risk (also known as beta or diversifiable risk), interest-rate risk, and inflation risk.
Keep in mind that while some investments may be liquid, you may not get what you paid for them if you have to sell them at the wrong time. Stocks are liquid, but the price you can get when you have to sell might be lower than what you paid. This illustrates market risk. Treasury bills too are liquid, but if you have to sell before maturity, there is the risk that interest rates will be higher (inflation risk) than when you purchased yours, which would mean you would receive less cash on a sale.
For an investor with a shortened life expectancy (LE<2), interest-rate and inflation risk are less of a concern due to the shortened investment horizon. Inflation risk and interest-rate risk take on greater significance the longer the investment horizon (2<LE<5) (LE>5).
Risk can be minimized in various ways. Allocation, diversification, and dollar cost averaging all need to be considered when making investment decisions.
• Allocation is the minimizing of risk by investing across different investment classes (e.g., cash equivalents, fixed income, equity), or more simply stated, “not putting all of your eggs in one basket.”
• Diversification is close to allocation, except with the more specific goal of selecting a portfolio of assets whose values tend to move in different directions. The objective of diversification is to minimize risk by allocating your total portfolio of investments across different assets that tend to perform differently at any one time. The principle of diversification applies both to different investment classes (e.g., fixed income versus equity), as well as to different assets within the same class (e.g., blue-chip versus small-chip equity). One common method of diversification is to invest in mutual funds or index funds rather than individual securities.
• Dollar cost averaging is investing equal amounts periodically—each month or each quarter for example—instead of investing a lump sum at one time. Dollar cost averaging spreads your investment across time, which minimizes the risk of adverse swings in the value of your investment. Using this strategy, your monthly investment purchases more shares when prices are low and fewer shares when prices are high. Adopting this strategy helps you to establish investing as a priority.
LE<2. For the investor applying an income strategy, minimizing risk is a primary investment criteria. The basic risk principles of allocation, diversification, and dollar cost averaging are less meaningful for the investor using an income strategy because the majority of this investor’s portfolio will be in low-risk, highly liquid “cash equivalent” investments. However, as the primary investment criteria for an income strategy are satisfied, and there are additional funds to pursue a complementary growth strategy, these risk principles become fundamental.
2<LE<5, LE>5. People with a longer statistical life expectancy have a higher tolerance for risk: the more time you have, the higher the tolerance. Remember that time and risk are relative: a person at age thirty-two without a life-challenging condition could afford an investment in a friend’s “wild scheme,” but not the same person at age sixty-eight, unless he has plenty of other assets. Allocation, diversification, and dollar cost averaging become more important the longer the time with which you are working.
5.3 Return
Return is the earnings you receive on your investment. Usually, return relates to the risk of a particular investment.
An investment’s total return consists of two components—yield (interest and/or dividend income) plus capital appreciation (increase in the value of your investment). Depending on the type of investment you make, your return will consist of one or both of these components. When considering return, also consider the type of interest rate (fixed or variable) and the payout method offered (period or at maturity).
The term return is used with different meanings. When comparing returns, make sure you are comparing apples and apples. Although the following uses are standard in the securities industry, confirm the meaning of each term whenever it is used:
• Real return is equal to the quoted return less inflation.
• True return is equal to the quoted return less inflation and less fees.
• Average return is equal to total annual returns divided by the total number of years during which you own the investment.
• After-tax return is equal to your return after taxes are subtracted.
• Equivalent taxable yield compares a tax-free yield to one that is taxable. Equivalent taxable yield is yield subject to tax, before deducting the tax. The idea is to figure out what investment has a greater yield, taxable or tax free. To make the comparison, start with the sum of your federal and state tax rate. Determine the tax on the taxable investment. Subtract the tax from the return on the investment and compare the result to a tax-free investment. Notice that if your tax rate is low (say for example while you are on disability), your yield on the taxable investment increases.
LE<2. For the investor applying an income strategy, return is not an important investment criteria, since the emphasis is on maximizing liquidity and minimizing risk.
2<LE<5, LE>5. The longer the time you have to work with, the greater your tolerance for risk, and thus the greater the opportunity to benefit from potential higher returns. Remember, however, that as compared to the average investor, you want to pursue a less risky strategy.
5.4 Fees
An investor with a shortened life expectancy has a shorter investment horizon not only for realizing returns, but also for amortizing fees and other related costs. Fees, therefore, are also an important investment criteria.
There are several types of investment fees including
• management fees for asset-management services.
• transaction fees such as sales commissions and trading charges.
• “hidden” fees such as charges for withdrawals, transfers, or redemptions.
Your investments may be subject to any or all of these fees, depending on the type of investments you make (e.g., simple cash equivalents as compared to more complex mutual funds), and the investment method you use, such as do-it-yourself instead of using a financial adviser.
Investment fees and related costs can take a large bite out of your annual returns. As with any new investment you make, some basic research and comparison shopping will save you money. Review prospectus documents carefully to determine fees. If your investments are made through a financial adviser, ask how their fees are determined (the more fees are tied to performance the better). Are there lower fees for different amounts of investment? Don’t be afraid to bargain for discounted fees, particularly if you’re investing a significant amount of money through one adviser.
5.5 Taxes
Taxes are another important investment criterion, particularly for the investor whose primary concern is liquidity, simply because any tax due at the end of the year will be a drain on precious cash flow. Keep in mind that taxes vary depending on your tax bracket. While no investment should be made based solely on the criterion of tax (or any other single criterion), investments should be made with due consideration given to avoiding or deferring tax (for both you and your heirs).
Generic types of investment tax to consider.
• Tax on interest/dividend income and tax on capital gains.
• Local, state, federal, and property tax.
• Estate tax.
• Alternative minimum tax.
Tip.
• Keep in mind that your tax rate will change with your income.
• Consider whether return on a particular investment will change your tax bracket, making it less valuable.
• Try to maximize pretax contributions to retirement plans. Income will eventually be taxed, but not until the years when your income will probably be less (during disability or retirement).
• Try to sell investments that will produce a loss this year (claim tax deductions for investment losses while your earnings are high) while buying investments that will produce a gain next year (defer capital gains tax until your earnings may be lower).
• Pay careful attention to tax deadlines.
• Depending on your overall investment strategy, try to invest in tax-exempt or tax-deferred investment vehicles. Before you invest to receive nontaxable income, be sure you understand the value to you. A higher return that is subject to tax may be better for you than a smaller tax-free return. To compare the two, take your tax rate (both state and federal) and tax the taxable investment. Then, compare the after-tax return to the tax-free investment. If your Adjusted Gross Income is over $117,950, then the amount of your itemized deductions and personal exemptions are subject to reduction because of your high earnings. Thus your calculation should also include the benefit nontaxable income has on the retention of itemized deductions and exemptions. If numbers are not your strength, your accountant or financial adviser can help compare returns for you.
Income-tax and estate-tax planning. If taxes are an issue for you because of the size of your income or estate, consult a professional tax adviser for assistance in planning a strategy that maximizes your net return.
5.6 Administration
The administrative burdens associated with a particular investment are also important to consider.
• What is the minimum administrative effort that a certain investment vehicle will require of you?
• Do the investment’s benefits outweigh its administrative costs and use of your Life Units? To illustrate, take a second to contemplate the administrative burdens associated with three investments of differing complexity—CDs, mutual funds, and real estate.
• Do comparable investment vehicles offer any options for reducing administrative burdens? Following are examples of available options for reducing fund transfers and paperwork:
• automatic deductions from your payroll for retirement plan contributions.
• automatic deductions from your bank account for mutual fund contributions.
• automatic credits to your bank account for interest and dividend payments.
• telephone redemption of shares.
• interest and dividend reinvestment plans.
• dollar-cost-averaging planning.
Section 6. Investment Vehicles
Now that we’ve covered the basic investment decision criteria, we can focus on various types of investment vehicles available. There are three generic types of investments: cash equivalents, fixed-income, and equity investments. As the name indicates, cash equivalents generally refers to investments that are less than one year in maturity and can readily be converted to cash. Fixed-income investments are those in which the return to the investor is set in the investment documents. They may or may not be readily salable. The most common fixed-income investment is a bond. Equity investments are ownership interests, the value of which varies with the value of the company in which you invest. The most common equity investment is common stock. Real estate is another common example.
Because cash equivalents are a basic part of every investment strategy, they are discussed in detail below. Likewise, mutual funds are discussed because they are a popular means of purchasing investments. Annuities are also investment vehicles that warrant mention.
6.1 Cash Equivalents
LE<2. Highly recommended for the investor with a shortened life expectancy. Cash equivalents meet the essential criteria of maximizing liquidity and reducing risk.
2<LE<5. Recommended for the investor with a two-to-five-year life expectancy. It is important that you maintain liquidity but also plan for the possibility that you will live longer than expected. You need to constantly strive for a comfortable balance of income and growth.
LE>5. Recommended as part of an overall strategy that combines concerns about accessibility to cash with concerns about growth.
The chart starting here compares features of the various cash equivalents. The interest paid on each account will vary over time, so it is advisable to periodically compare rates offered by competitors.
6.2 Mutual Funds
Mutual funds are investment vehicles that permit the investor to diversify a limited investment. Each fund has its own investment guidelines and priorities. Mutual funds may be composed of bonds, stocks, or money market funds, or any combination of the three types of investments. Do not confuse mutual funds with bank money market deposit accounts, which are FDIC guaranteed.
LE<2. Not recommended unless part of a growth strategy after income-strategy funds are in place.
2<LE<5. Recommended. Should be considered in achieving desired balance between income and growth strategies.
LE>5. Recommended.
Types of mutual funds.
1. Closed-end versus open-end funds: Closed-end funds represent a fixed portfolio of investments and a fixed number of shares issued, whereas open-ended funds represent a flexible capital structure and have no limitation on the number of shares issued. The price for open-end fund shares is based on the most recently computed net asset value (NAV) of the fund. The price of shares for closed-end funds is determined by the supply and demand for the shares on the market and is not tied to the share’s NAV. When the market price exceeds a share’s NAV, it sells at a premium; when the market price is less than the NAV, it sells at a discount.
2. Single-family and supermarket funds: Several funds in one portfolio account.
3. No-load versus load funds: No-load funds do not charge commissions (loads) but may still charge fees and other associated costs. Load funds charge front-end commissions (a commission payable upon purchase) and/or back-end commissions (a commission upon redemption).
Tip. There are mutual funds that waive the commission charges in the event of disability even if you are disabled when you purchase the investment. If you are going to invest in a mutual fund, this feature can mean a substantial savings to you.
When considering a mutual fund, look at:
• Denominations: Typical minimum investment is $1,000.
• Sales channels: Mutual funds may be purchased directly from mutual fund companies or through banks, brokers, financial advisers.
• Risk: Depends on the underlying securities in the fund.
• Return: Depends on the underlying securities in the fund. Take note whether reinvested dividends are subject to tax.
• Term: The term of a mutual fund depends on the underlying securities in the fund. For example, money market funds are short-term maturity, but typically more than one year.
• Fees: Review each prospectus carefully. Expect to incur one or more of the following expenses:
• Commissions, “loads,” or other transaction fees.
• Annual management and administration fees (typically 1–2 percent of your portfolio value).
• Advisory fee (typically 1 percent).
• You can avoid certain fees by purchasing directly from mutual fund companies.
• If you use a broker, ask what amount of initial investment might qualify for a break on commission points. Also, ask yourself whether you receive above-average returns plus value-added services that justify the fees you are paying.
Tax. Mutual funds are required to make annual distributions to investors on at least 90 percent of the interest, dividends, and capital gains on the underlying investments in the funds. Distributions are declared as of an “ex-dividend date” before the end of each calendar year and are subject to income tax or capital gains tax.
6.3 Tips Regarding Mutual Fund Taxes and Fees
There are several important tax consequences to bear in mind when selling or purchasing mutual fund shares:
• Avoid paying income tax on someone else’s gain. Time the purchase of your mutual fund shares by purchasing after a dividend date to avoid a gains tax on the newly purchased shares without having realized any capital appreciation.
• Avoid double taxation of capital gains. When you sell your mutual fund shares (at a profit), you will be subject to capital gains tax. Make sure to account for any prior capital distributions (as cash or shares) made by the fund on which you have already paid capital gains tax—otherwise you will pay capital gains tax twice.
• One of the major disadvantages of mutual fund investments are the associated tax consequences—specifically the lack of control investors have over the timing of distributions. This problem is compounded by the fact that most mutual funds are managed without specific consideration given to taxes, and mutual funds and their managers are judged on pretax performance. There are two possibilities to alleviate this problem: (1) make mutual fund investments inside tax-deferred retirement vehicles or (2) invest in recently established “tax-managed” mutual funds.
Tip. Consider a mutual fund withdrawal program. Sam W. invested $10,000 in a mutual fund for his aunt Sandra. He advised the fund that he wanted a $100 monthly capital gain. Sandra gets that amount every month. It’s possible that the fund could perform at better than twelve percent, providing a capital appreciation as well as the monthly return.
6.4 Annuities
An annuity is a contract between you and an insurance company, where you invest a premium in exchange for a series of future payments (annuity) over your lifetime or a fixed number of years. An annuity differs from a life insurance policy in that it insures you against the financial risks associated with outliving your life expectancy, whereas life insurance insures your beneficiaries against the financial risks associated with an early demise. Typically, the insurance company deposits these premiums in a portfolio of securities until the time when those assets must be converted into annuity payments. Annuities can have either a fixed or variable return.
LE<2, 2<LE>5. Not recommended.
LE>5. Only recommended under limited circumstances for those doing retirement planning. Annuities and retirement plans both serve as tax-deferred investment vehicles for retirement. Most retirement plans are limited by a maximum or pretax contributions, whereas annuities do not face this limitation. An annuity may be worthwhile for an investor who has already made the maximum pretax contributions to retirement plans and would like to make additional tax-deferred investments for retirement (provided the investor is in a high enough tax bracket to benefit from doing so).
Characteristics of annuities.
• Types of annuities:
• Immediate annuities: You begin receiving money immediately after paying a premium.
• Deferred annuities: You begin receiving payments no earlier than one year after you pay the premium. There are three types of deferred-payment annuities: fixed rate, variable rate, and indexed. With a fixed rate annuity, both interest and principal are guaranteed. With a variable rate annuity, neither interest nor principal is guaranteed. The rate varies according to the value of stocks and bonds the insurance company purchases. There are two types of variable rate annuities: single-premium payment and payment of premiums over time. With an indexed annuity, neither interest nor principal are guaranteed. The rate varies according to a specified index that varies from company to company. Note that while a “minimum interest rate” may be offered, that does not mean the rate is guaranteed, and there are often hidden caps on returns to policyholders. Also note that both variable rate and indexed annuities are considered “securities” and are thereby regulated by the SEC.
• Term: Can be for a fixed period of time or a variable time.
• Sales channels: Insurance companies, banks, S&Ls, third-party sales agents.
• Liquidity:
• Vesting schedules maybe ten years or longer.
• Early withdrawals made before age 59½ are subject to both a contractual penalty and a 10 percent tax penalty.
• There can be waivers and surrender clauses for terminal illness. Some companies offer an annuity with a terminal illness waiver or terminal illness free surrender clause—meaning that upon diagnosis of a so-called terminal illness, the insured can withdraw 100 percent of the account value of the annuity without penalty. To be eligible for the waiver, the insured must have a life expectancy of twelve months or less.
• Risk: Consider both the quality of investment portfolio underlying the insurance company’s annuity obligations and the solvency of the insurance company.
• Return: Compare rates of return on comparable investments—e.g., fixed rate annuity versus CDs, variable rate annuity versus mutual funds, and index annuity versus stock index fund.
• Fees: Depending on the type of annuity you select, fees may include any of the following:
• annual contract charge.
• investment management fee.
• commissions.
• front and/or back-end fees.
• surrender charges.
• Taxes: Applicable tax issues include
• tax deferral of investment income.
• capital gains taxed at income tax rate (versus lower capital gains rate).
• 10 percent tax penalty for early withdrawals before age 59½.
Section 7. An Example
To illustrate how the strategies described in this chapter may be applied, following is an example of an investment strategy that could be recommended to a person with a two-year life expectancy who does not have securities expertise.
• Put six months of living expense into a money market fund. The money would be available daily, yield more than a bank savings account, and maintain a net asset value of $1 per share on your deposit. The investment is liquid; diverse; highest current rate of return among the cash equivalent investments; fees are calculated before determining rate of return; no administration. Income is subject to tax as available.
• Put six months of living expenses in short-term bond funds. These funds have average maturities of three years or less. The investment is liquid; diverse; has an even higher rate of return than a money market fund; money can be accessed when it will probably be needed, but not immediately; fees are calculated before determining rate of return; no administration; income is subject to tax, but not before it is, or can be, received.
• If there is still money left over, put it in a no-load mutual fund with government or corporate bonds—preferably one that waives all fees in the event of disability. The investment is low risk; flexible; has a good rate of return for low risk; lowest fees; tax to be considered in choosing the fund; cash available, if necessary, though there may be a loss due to timing.
Section 8. Ten Commonsense Tips for Investment Success
1. Investment is simply a means to an end, therefore the measure of your investment “success” will be how well your investments enable you to realize your goals.
2. Shop around—for investments and advisers. Evaluate your investment options relative to each. Remember that your “true” rate of return is equal to the nominal rate minus inflation minus fees and costs. Make sure any verbal claims or promises are confirmed in writing.
3. Stay informed—even if you use advisers. Always do some basic research yourself. Do not invest in something with which you are not familiar or otherwise comfortable. If necessary, “sleep on it” until you have more information to make a better decision. When evaluating prospective investments, bear in mind that historical performance is not a guarantee of future performance.
4. Be aware that investment vehicles purchased through a bank are not necessarily guaranteed or FDIC insured like bank deposits (e.g., mutual funds purchased through a bank).
5. Be careful not to purchase tax-exempt or tax-favored investments (e.g., U.S. savings bonds) for vehicles with tax deferment such as 401(k) plans. Otherwise, tax-exempt or tax-favored investments will be treated as if they are tax-deferred investments and will be subject to tax upon distribution.
6. Pay attention to the timing of the purchase of your investments. Unless you are a professional investor, the market-timing approach (i.e., anticipating the best time to purchase an investment) is not a good one. For investors with at least a one-year investment horizon, the dollar cost averaging approach is recommended.
7. Be careful not to redeem an investment before a payout date, otherwise you could lose accrued interest or dividends. For example, redeeming a savings bond one day early could result in a loss of six months’ interest.
8. Make investing a priority by treating it like the purchase of a monthly necessity.
9. Periodically review your investment strategy, financial requirements, and personal goals to ensure they are still synchronized.
10. Do not allow emotional attachments to influence your investment decisions. Don’t invest based on hot tips, rumor, or gut feelings.
And finally. Don’t worry about how your investments are doing every day. This book is being written at a time when a bull market has been roaring ahead for ten years. The nightly news programs feature the market daily. It’s easy to think, “If only I had put everything in stocks…” But some night the news is going to talk about how the bear market may have taken over, or has taken over, or the story could be about how the company you speculated in was hit with a huge liability suit such as the asbestos industry went through. You may not have the time to make your capital over again. It’s one of those times when an old adage truly works:
It really is better to be safe than sorry.