If you’re worried about the fate of the stock market, this lesson and reminder of the power of Know-How could prove quite valuable.
You see, a man stopped by the farm the other day.
He wanted to sell us insurance.
His visit wasn’t unsolicited. We called him looking for some help.
But instead of giving us a few quick answers on the phone or, doing what most folks in his game would do, sending us to a website, he did something old-fashioned.
“Do you mind if I stop by?” he asked. “I’d love to see the place and talk face-to-face.”
Wow. We felt like we’d gone back in time 50 years.
We were glad for it.
You see… barns burn. Roofs go with the wind. Drunks smash into cows.
And lawyers come looking for anything that’s not nailed down.
We need protection.
And our insurance man took the time to uncover our needs, find what fits best and make sure we were well-informed.
Try getting that by calling a duck… a lizard… or whatever mascot the marketing department can dream up today.
But we didn’t pick up the pen this morning to question your insurance needs. That’s not our game (but we know a guy who’s quite good).
No, our beat is money.
Specifically… how to make more of it.
But given Wall Street and Washington’s antics over the last few days… we bet you’re not all that concerned with making money at the moment.
Most of the folks we’ve heard from are simply looking for some protection.
To be sure, no salesman will come knocking on your door looking to sell you insurance for your portfolio.
If he does… turn the dog loose.
You don’t want the dope he’s pushing.
There are only three proven ways we know of to protect your money when the markets go nuts.
The first two you’ve heard of. And we’re sure you won’t like them.
We’ve all been sold the mantra of diversification.
It works… but not like it used to.
When information traveled slowly and most ciphering was done with a slide rule, a diversified portfolio of stocks and bonds did what it was supposed to. Some assets went up, while others went down.
The only bet an investor had to make was whether he had more ups than downs.
It was – and still is – a balancing act.
Spread things around too much and you’ve got a go-nowhere portfolio. Concentrate things in too few asset classes and you may get rich and then go broke.
But like we said, the system isn’t what she used to be.
New Times… New Strategy
In 2008, you may recall, everything plunged in value… including the wisdom behind a diversified portfolio.
That’s why many folks today are adding extra streams of income to their retirement equation.
Where a robust portfolio of stocks and bonds used to be all it took, many folks are now turning to rental properties, franchise ownership and small, part-time businesses.
In fact, roughly a quarter of folks driving for Uber these days are over 50.
These tactics are sound. They provide income whether stocks are up or down, and they make up for the obvious limitations of relying on Social Security.
But the flaws are obvious.
Retirement shouldn’t mean getting up each morning to run a business. It shouldn’t mean losing your Liberty to a new boss. And it shouldn’t mean relying on others.
That’s where the third idea comes in.
Rich With Know-How
For most folks, this is new.
Or more accurately, they’ve always known about it but never tried it because they didn’t know what to do.
It’s where our old-pal Know-How comes in.
It’s something we’ve mused about a lot over our decades in the money game. There are lots more ways to make money from the market than just buying a stock and praying it goes up.
In fact, that’s one of the worst ways.
But simplicity trumps effectiveness.
It’s easy to buy a stock.
It’s easy to build a portfolio and walk away for a few years.
But the results stink… especially when we hit rough patches (have you seen the news this week?).
It’s like our insurance man said: “You don’t know what you’re missing until hell breaks loose. Then it’s too late.”
It’s why we urge folks to get serious about their investing Know-How.
We want them to learn what it takes to truly build wealth… and keep it when hell’s demons are blowing down the door.
But we get it.
Learning a new trading technique is hard work. Nobody wants to do any more work than they have to.
That’s why we urge readers to do just one thing.
Dedicate this week to studying just one new idea.
Perhaps you could use a lesson on options. Maybe you could use some Know-How on what it means to short a stock. Perhaps you want to raise some income using covered calls.
Pick a strategy and focus on it.
There’s no need to become a master. Just know how to make that single strategy work for you.
When the hot winds of Hades start blowing… you’ll be glad you did.
Insurance is good.
It’s how we sleep at night.
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