The theme this week on the Retirement Quick Tips Podcast is the Deadly Sins of Investors In Bear Markets.

Today, I’m talking about the deadly sin of taking on more risk to make up for losses. 

Most often I see this happen to investors who are approaching retirement. Maybe you’re 5 years away from retirement, your portfolio is down 30% and the only path you see forward is to roll the dice and get super aggressive in the hopes that your big bet will pay off and you will be able to still retire in time. 

I knew someone close to retirement who was behind on saving enough and felt tremendous pressure to catch up. He liquidated his entire 401k, invested it in a single stock. 6 months later he looked like a genius because he doubled his money. But he didn’t sell a single share and in less than 2 years he lost 95% of his investment, and his nest egg is all but gone. 

I wish this story was a one-off, but unfortunately it’s all too common. We can become so blind to what’s best for us, when we feel cornered and panicked about how to make up for lost time. 

Then we see an opportunity to invest in something that’s our lotto ticket to a comfortable retirement, and like most lottery tickets, it just ends up becoming a worthless piece of paper. 

My best advice here is to accept the circumstances you find yourself in today, and figure out where you’ll compromise to make up for lost time. Will you work longer? Will you live on less in retirement? Will you downsize and sell your home? We often want to avoid the more painful way out that involves some sacrifice, but it avoids the risk of losing everything by taking unnecessary risks when you can’t afford to lose so late in your working years. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance