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I am very pleased to announce that my book, Crash-Test Investing, is finally available for sale on Amazon. Right now, only the paperback version is available, but we are working on the Kindle version. You should buy a copy for every room in your house, all your friends and family, and all the rooms in their houses. Go ahead—I’ll wait! Unless you’re a Commonwealth advisor, in which case you’ll be getting a copy at our National Conference.
Before doing that, however, you might ask yourself these questions: Why do we need another book on investing? And what do I have to offer that made it worth my time to write?
The future is now
These are good questions. The good answer is that the existing alternatives don’t specifically address a real and rising problem: the aging of the population, as well as the increasing exposure of investors as a class to the very real risk of failure that could come from a serious and sustained market decline. For years, the mantra has been to buy and hold. That was—and remains—the best advice for those who have decades before they need the money. They should invest regularly, dollar-cost average over time, and not worry about it. That guidance is certainly what I would tell my son, now and for the next 30 years.
But for people of a certain age (me, for example, and many clients I speak with), those decades are rapidly becoming a decade and maybe even less. For people already retired, that future is now. For all of us, the prospect of a significant and sustained decline now has the potential to blow up our financial plans in a way it would not have 20 years ago.
Losses can hit a portfolio hard. When someone is close to—or already—drawing down that portfolio for income, the effect is doubled. Conditions for many investors are riskier than they have ever been, simply because they are older. When you combine that with the current risky market and economic conditions—not immediately but over the next couple of years (that sentiment will be familiar to regular readers)—I, at least, start to ask myself whether there is a better way.
A simple model
I believe there is a better way, which is why I wrote the book. It takes ideas I have written about here and incorporates them in a simple model—requiring about one hour per month—that historically has avoided significant drawdowns even in the most stressful market environments. It really has limited risk and minimizes the chances of a market blowup derailing a financial plan.
Even for younger investors, the book offers a chance to avoid some of the heart-stopping volatility we have seen in the past 20 years. You might be able to ride the roller coaster; you might even benefit from doing so. But that doesn’t mean you want to or even that, emotionally, you can. Limiting volatility can make it easier to stay the course and achieve your goals. This book is also for people who simply want a smoother ride.
The model isn’t the only solution to the problem, of course, and it is not for everyone. It tends to underperform in up markets, and the tax impact can be substantial in taxable accounts. That said, it does offer a different approach that might help people who can’t afford significant losses or who simply don’t want to endure the turmoil.
Let me know what you think!
I am proud of this book. I think it offers something different and something helpful. At the very least, I believe it offers a new way to look at how we reach our financial goals. I use it myself, although in a more complex way than the book sets out, and that is the purest tribute I can give.
I look forward to hearing your thoughts.
