Market forecasts dominate financial media. Turn on any business channel, and you’ll hear predictions about corrections, rallies, and the perfect time to buy or sell. However, we believe this focus on market timing can be dangerously misleading for retirement planning.
The Market Timing Trap
Recently, wealth manager Eddie Gabor appeared on Fox Business with a bold prediction: “You should expect a summer correction, but I would be buying those hand over fist because the biggest thing I’ve seen here is people have missed this rally.” He went on to explain that many investors continue to ask how much higher the market can go, suggesting that any summer dip would be a buying opportunity.
This advice sounds compelling. However, we want to address a fundamental problem with this approach. While timing the market and buying dips might create short-term opportunities, this strategy puts you in a precarious position if it becomes your primary investment philosophy.
The Real Cost of Missing the Rally
Gabor mentioned something particularly interesting. He noted that people have “missed this rally.” This raises an important question: how exactly do you miss a market rally? The answer is simple. You’re sitting on the sidelines, not doing anything.
We’ve witnessed this phenomenon for nearly two decades. The market has experienced tremendous growth over the last 15 to 20 years, with some periods of volatility mixed in. If you’ve missed the rally, you’ve been paralyzed by fear or uncertainty, waiting for the “perfect” time to invest. Meanwhile, your money has earned nothing while markets have delivered triple-digit returns.
Why Market Timers Always Face the Same Problem
We need to be honest about what market timing requires. To succeed as a market timer, you must get it right every single time. You need to sell at the right moment and buy back in at the right moment, repeatedly, without fail.
Think about the emotional burden this creates. Let’s say you’ve been sitting on the sidelines for years. You’ve already missed the run-up. Now you’re terrified of being “the sucker that buys in at the top.” This fear becomes paralyzing. You can’t pull the trigger because you don’t want to lock in a loss or enter at precisely the wrong moment.
Additionally, this problem becomes exponentially worse once you retire. Before retirement, you might tell yourself you’ll “ride out the losses” during market downturns. That’s easy to say when you’re still earning income from your job. However, the second you retire and your portfolio becomes your only source of income outside Social Security, you no longer have the luxury of just riding it out. You still have bills to pay and a lifestyle to support.
The Dangerous One-Dimensional View of Investing
We frequently hear people say investing is either a good time or a bad time based solely on whether markets are up or down. This perspective is far too one-dimensional. The reality is that investing has many different layers, and numerous options exist whether markets are trending up or down.
For example, one of the portfolios we work with extensively has been on a tear this year—our stock dividend portfolio. This approach focuses on stocks that pay dividends, not just growth stocks that rise and fall with market sentiment. Many excellent stocks pay 7%, 8%, or even 9% annual dividends, plus they typically provide some growth as well.
This is just one example of how we can apply investment dollars in ways that don’t depend entirely on market timing. Some of your investment dollars could certainly be positioned to take advantage of opportunities like dips. However, a major part of your portfolio should follow the “slow and steady wins the race” philosophy, generating consistent returns rather than sitting on the sidelines.
Building a Durable Portfolio Instead
We often tell people something that raises eyebrows: we’re not primarily concerned about getting you really big, exciting returns. People react with surprise, wondering why they should work with us. The reason is simple. If you’re chasing those exciting returns, you will always experience some level of disappointment and pain.
Instead, we focus on building what we call a durable portfolio. This means creating an investment strategy appropriate for your specific situation—one that compensates you properly for the risk you’re taking, whatever risk level you’re comfortable with. When we build this kind of portfolio, you’ll stay invested. When market volatility increases, you’ll be okay. You won’t jump in and out emotionally.
Moreover, here’s the benefit: when opportunities do arise, if there really is a big dip to buy, you’ll be poised with a portfolio that’s ready and nimble. You can take advantage of those situations. You will get those big, exciting returns, but we can’t start with that as the foundation.
The Power of Polarity in Portfolio Design
Our portfolios are typically built on the concept of polarity. You have growth money that should stay focused on growth—that’s its job, and it should stay in its lane. Then you have a separate category of money that’s lower risk, preserved from excessive market volatility. This money anchors your portfolio so your growth money can remain your growth money.
The beauty of this structure is that you have two pockets to pull from. Perhaps you’re retired, and suddenly the markets drop. You still need your income. Now we have a pocket to pull from—this less risky money that isn’t down like your growth money is. This allows your growth money to recoup, let the dust settle, and rebound, and then we can draw from it when needed.
Conversely, let’s say the markets are cooperating well, as they are right now, hitting new records. If your portfolio is designed correctly and it’s durable, we should have a conversation about using some of this money as dry powder for opportunities. If a dip is coming, you have a pocket to pull from that we can use to take advantage of it.
What Actually Qualifies as Low-Risk Money?
We frequently encounter people who believe they already have a polarized portfolio. They’ll say they have technology stocks for growth and blue-chip dividend-paying stocks with some bonds as their safer allocation. However, we need to challenge this assumption.
Warren Buffett has two rules of money. Rule number one is never lose money. Rule number two is always adhere to rule number one. Many people believe they never lose money because they don’t sell. However, when you begin taking income from your portfolio in retirement, that philosophy falls apart.
We encourage people to stress test their portfolios. Apply a 2008-2009 scenario or a 2022 scenario to your portfolio. Check what those dividend-paying stocks and bonds actually did during those periods. You might discover they weren’t nearly as safe as you thought.
The reality we consistently find is that most people don’t actually have polarity in their portfolios. They come into our office and we discover they have 85% of their money in equities. They protest, saying some of those are lower-risk equities. That’s not what we’re talking about. They essentially have a 35-year-old’s growth portfolio when they’re 61 years old and retiring in two years.
Now, if that’s appropriate for your situation, excellent. Maybe you have a six-figure pension plus Social Security, and you don’t need this portfolio as your income engine. You have no debt, no mortgage, and more guaranteed income than you could ever spend. In that case, you’ve given yourself the ability to have an aggressive portfolio. Unfortunately, most people aren’t in that situation.
The Trait of Success: Willingness to Learn and Act
If you’re within seven years of retirement or less, and you’ve done the bulk of your saving, engaging with a professional to discuss your portfolio demonstrates the trait of success. The trait of success isn’t that you’ve already made it, you’re already wealthy, and everything is perfect. The trait of success is being willing to learn and take action to improve based on what you learn.
People who maintain this attitude throughout their lives, particularly regarding portfolio management, are the ones who end up on top. They’re content because they have a plan. They know what they’ll do when difficulties arise.
Mike Tyson said it best: “Everyone’s got a plan until you get punched in the face.” You might have a perfect portfolio right now, but tomorrow the punch could come. It could be a health issue, a market crash, an economic or political crisis, a pandemic, or anything else. A haymaker can come from nowhere, and suddenly your portfolio is limping along. You become one of the statistics who lost 40% in two weeks because you thought you were in a lower-risk portfolio when you weren’t.
The Question You Need to Ask Yourself
Here’s a critical question we ask people, and you should ask yourself: If there was a problem brewing in your retirement plan or portfolio that you couldn’t see, how soon would you want to know about it? The answer is immediately—now, yesterday, as soon as possible.
Unfortunately, many people avoid this examination. Like those who avoid going to the doctor because they don’t want to know what’s wrong, some investors put their heads down and hope everything will work out. However, if there was a fixable problem today, if there were moves you could make right now that could completely eliminate a potential future disaster, why wouldn’t you take those steps?
Our Approach: Better Returns with Less Risk
Let’s be clear about what we’re offering. We’re not suggesting you overhaul your portfolio, abandon exciting growth, and resign yourself to boring, minimal returns. Not at all. What we’re saying is that there’s an appropriate level of risk for the income portfolio you’ll need one day, whether that day is today or five years from now.
One of our primary aims is to beat the benchmarks—the S&P 500, the Dow, the NASDAQ—with less risk. We focus on compressing volatility while still achieving strong returns. When you combine this with a polarized portfolio that includes lower-risk money you can draw from when equities are down, you’re set up very well if you’ve saved adequately throughout your life.
Therefore, our main objective isn’t to react to every news clip about buying dips or summer corrections. These stories will always exist. There will always be turmoil—wars, truces, political uncertainty. All of it affects markets. We should be ready to take advantage of opportunities that arise, but you cannot build your entire portfolio and retirement plan around whether or not you timed things right. That is the definition of sadness when it comes to retirement planning.
Recognized Excellence in Financial Planning
Best Financial Planner in Woodstock, GA for 2023, 2024, and 2025
This recognition reflects our commitment to providing comprehensive, personalized retirement planning that prioritizes your long-term security over short-term market predictions. We believe this acknowledgment from our community validates our approach of building durable portfolios designed to weather any market condition while still pursuing meaningful growth.
Take the Next Step Toward Retirement Confidence
If you’re within seven years of retirement or already retired, we invite you to experience our no-cost three-meeting Retirement Planning Process. These are discussions you may not have had yet, and they could make all the difference in your retirement security. We’ll walk through your situation at no cost and with no obligation. If you like working with us, you’ll hire us. If you don’t, you won’t. Either way, we’ll part as friends.
Visit our website at https://www.vincentplanning.com or call us at 770-485-1876 to get started. You can also Book a ‘Can We Help’ Call to speak with an advisor and see if we’re the right fit for your retirement planning needs.
For personalized financial guidance, reach out to Vincent Financial Group today to schedule a consultation.