A Simple Test That Could Save Your Retirement

Sep 19, 2016
Author: Scott Hanson

The Biggest Dilemma You Face

If there was an emergency today, a terrorist attack, a natural disaster, or a sudden market sell-off that plunged the value of stocks by 40 or even 50 percent, what exactly would happen to your portfolio?

Would you lose 25 percent? 50 percent? Would you be ruined?

Given the up and down nature of the stock market, and considering that we are in the midst of one of the longest bull runs in history, if you haven’t been paying close attention to the allocation of your portfolio, now you should.

A History of Bulls Overtaken by Bears

It’s been over 2,700 days since our current bull market was born from the ruins of the Great Recession. This makes it the second longest bull market in history.1

The longest bull run in history occurred between 1987 and 2000, and, much like the market conditions of today, was largely built on technology. This was called the “dotcom” bubble, and during its unprecedented 13-year run, some experts called it: “A new economy, impervious to the threats of the past.”2

But, as they often do, circumstances changed.

From March 11th, 2000, until October 9th, 2002, the Nasdaq alone lost 78 percent of its value, going from a high of 5046.86, down to a low 1114.11.

The total loss to investors from 2000 until 2002 has been estimated to be in excess of $5 trillion.3

If the Market Collapsed Tomorrow, What Would Happen?

When the market plummets, what happens to your portfolio? There’s only one wrong way to answer this question, and that would be to simply say: “I have no idea.” It is the responsibility of you and your advisor to clearly understand how market fluctuations could harm (or help) you, and to allocate your portfolio in such a way as to minimize the effects of a major market downturn.

That’s because, as Pat McClain clearly explains in this special video, there are basically two costs to your portfolio. First, the fees that are charged to manage your money. (Because we’re a fiduciary, we believe that these fees should not be prohibitive.)

The second cost to your portfolio is concerned with your risk tolerance. This means that it is our goal to manage your portfolio so that your returns compensate you for something called “the cost of risk.”

One of the most worrisome realities we face at Hanson McClain is just how many people we meet with for the first time who have no idea what level of risk they are carrying in their portfolios. We’ve had people come to us who had saved millions of dollars, and yet who didn’t realize that a fairly typically market correction could devastate them financially.

How Do We Identify Your Optimum “Cost of Risk”?

To help us ensure you are being adequately compensated for your risk, we use a tool called the Portfolio Stress Test that can assess what may happen to your investments during a financial or geo-political event that causes a rapid rise or fall in the market.

Specifically, our Portfolio Stress Test not only analyzes 24 unique scenarios that could greatly impact you, it reveals how those fluctuations may harm your investments.

Get Your Portfolio Tested Now

Are you saving for the future? Do you have investments inside a 401(k), an IRA, or do you own individual stocks purchased through a broker or bank? If the stock market plunged by 50 percent tomorrow, how would that affect your portfolio?

We can tell you. Get a complimentary Portfolio Stress Test today.

[1] July 29th, 2016, CNN Money
[2] Andrew Beattie Investopedia Market Crashes: The Dotcom Crash
[3] February 26th, 2016 CNN Money

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