My dad is 75 years old today. There is not a man on this planet that I look up to more. Following college in the 1960s he served active duty in the Army for a couple years, then a nearly couple decades in the army reserves, 35 years of work in human resources while putting 4 kids through college (alongside my amazing mother, who worked tirelessly for 30 plus years, but ‘ll save that for her 75th). He retired in 2002 in the throes of a bear market that saw the S&P 500 (SPX) decline 50% from its March 2000 highs to its March 2003 lows. This was a dicey time for most Americans who had plowed their hard earned savings into the stock market in the years prior, and the investment decisions they made from 2000 to 2003 likely determined how those born in the 1940s could financially weather retirement. The steady hand that my dad is, he did not plow into risky stock investments or allocations during the late 1990s, and therefore was not forced to deviate much from his diversified 60/40 stock/bond allocation.
All was good, he became a volunteer fireman in the early aughts (which he is still does, winning awards annually for making the most calls). In retirement he saw the worst financial crisis since the Great Depression, resulting in another 50% peak to trough decline in the stock market from the 2007 highs to the March 2009 lows:
Again, no panic on his part, he did not veer outside his comfort zone from an investment standpoint with the second investment bubble inflating in ten years, and his sturdy 60/40ish allocation. He had mark to market losses in both instances, but did not join the party at the top, or liquidate at the lows.
At 75 years old, getting ready to hangup the Fireman’s gear, he’s going to spend more time with his children and grandchildren, hopefully watch his beloved Syracuse Orange win another hoops championship and tour the few major Civil War battlefields that he has not already seen.
But, one thing I am certain of, is he does not want to suffer through another 50% peak to trough decline in the stock market. Therefore he has become more defensive than in times past. He didn’t blink an eye when Carl Icahn calls for Danger Ahead in 2015 when the SPX was 2000, or when Warren Buffet suggest this week that stocks are cheap with the SPX at 2350, he’s looked to protect principal while giving up minimal upside.
I applaud his resilience in life, and his calmness in investing. While some think investing is just about capital, my parents always viewed their family as their most prized assets, the ones to expend most of their resources on, and savings and investments were simply a means to a safety net end.
There’s excitement in the market right now about tax reform and deregulation. But at this stage of the game, up 255% from the 2009 financial crisis lows, and with the Fed set to enter a rate hiking cycle, making sure you don’t get swept up in the euphoria is important. Avoiding bad decisions at all time highs is the most important decision you’ll have made when others are panicking at lows.