I was talking to a 67-year-old woman who is close to retirement and wanted me to review her financial portfolio. She has a money manager with a well-known full-service brokerage firm. She was upset because she lost $30,000 in the last month. When I looked at her portfolio, I was shocked. The money manager had her 100 percent in stocks. Whenever she asked him to reduce the allocation, he protested: “It’s not a real loss until you sell,” he told her. Hogwash.
To stop the bleeding, she finally got the courage to sell all her stocks and move into cash (i.e. money market) until she finds another financial manager. Good move. In a bear market, most stocks, even stocks of good companies, will sustain severe losses. The market might go down by 20 percent but many individual stocks will go down by 40 or 50 percent. This is not going to end well for millions of people who own individual stocks. If you’re close to retirement or retired, in my opinion, you should be reducing the number of stocks in your portfolio.