Retirees Need To Lower Investment Expectations

There’s nothing like taking 20% or 30% off portfolio values to really put the concept of risk into focus. This story about a cardiac surgeon is a positive one as it shows how one person recognized the volatility of the markets from the dot-com bubble burst in 2000 – 2002, and was positioned well during the recent downturn.

What worried Dr. Palanisamy, however, was a rerun of his experience in the bear market of 2000 to 2002, when his then-financial manager encouraged him to invest big amounts of money in a few high-technology areas.

“I took a big beating,” he recalls. “I knew I couldn’t afford to have that happen again.”

Today, even with the stock market in the midst of another wrenching period of losses and volatility, the 55-year-old Dr. Palanisamy is calm. Thanks to a new financial adviser, his portfolio is a blend of U.S. Treasurys, high-quality corporate bonds, high-yield debt securities, diversified blue-chip stocks and customized contracts that promise him at least part of the increases in specified stock-market indexes while limiting the losses he will have to absorb.

The lesson to learn? If you’re a retiree nowadays, follow the path of Dr. Palanisamy and manage the risk in your portfolio and learn from past mistakes.