The Secret to Never Losing Money in the Stock Market

Savings bonds are making a comeback
Money
Retire with Money
Elizabeth O'Brien is a senior writer at Money
I’m rewatching a popular late ‘90s/early aughts-era TV series, which I usually view in a happy haze of nostalgia. But an episode I saw the other night made me pretty upset. Over cocktails, four girlfriends discussed the stock market. “I’m not investing any more,” said the red-headed lawyer. “It’s too volatile.” I know she’s a fictional character, but still it pained me greatly to think that this high-earning single woman wasn’t maxing out her 401(k). And it hurt even more to imagine the many young people who have watched that episode in the nearly 20 years since its release, and taken from it the message that stocks can’t be trusted. In fact, stocks are a great way to build wealth. The key is holding onto them for a long time. In today’s edition, check out the secret to never losing money in the stock market.

Best wishes,
Elizabeth

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TIMELY RETIREMENT NEWS, INSIGHTS, AND ADVICE

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RETIRE WITH MONEY COMMUNITY NEWS
Please help me give a warm welcome to our reader of the week! Steve Woodall, 65, is a retired flight attendant and current landlord who lives with Dolly, his four-year-old, registered Turkish Angora cat, in Salt Lake City.
 
Steve

What are you up to these days?

I’m self-employed as a landlord. I own an 8-unit apartment complex and live in one of the apartments. I’m a political junkie and spend a lot of time on Facebook. I’m a bit of a loner, so my life hasn’t really changed a huge amount [in the pandemic]. Still, I’m looking forward to getting out and socializing a bit — at least going to dinner or a movie with friends or family occasionally.

Same here. Do you have any advice you’d like to share for others about preparing for retirement?

I retired from my job as a flight attendant with Southwest Airlines in September 2018. Fortunately, the job was very flexible once I had some seniority so I was able to work as much or as little as I preferred. This allowed me to ease into retirement and see how I could handle it both financially and psychically.  I believe that’s the ideal situation if you can make it happen. And, I would think about what you will do with your time -- especially if you have to transition suddenly from full-time employment to full retirement.

Good point. What's your saving/investing philosophy?

In 1992, I heard on the radio a man (Jim Anderson) talking about his book, “How to Live Rent Free.” The concept was really quite simple: Buy a 4-plex; two of the rents would pay the mortgage, taxes, and insurance; one rent would pay for repairs, upkeep, and improvements; you would live in the fourth apartment, “rent-free.” So, I decided to start shopping for a 4-plex.

Twenty-eight years later, I’m still living rent-free in one of my apartments. About half of my net worth is in apartments I have owned since 1993. That alone provides the income that I need. So, I feel comfortable being pretty aggressive with the approximately 36% of my net worth that is in IRAs and a brokerage account. I’m fully invested in the stock market — broad-based, index exchange traded funds. I believe I’m psychologically and financially equipped to handle this. I didn’t freak out and sell when the market crashed in 2008 and again in 2020. I also have at least a couple of years' worth of spending in cash accounts — online savings account paying 1% and credit union accounts paying 3%. In addition, I started collecting Social Security when I was 63, in 2018.

I’m a few years away from having to take required minimum distributions from my traditional IRA. My current thinking is that when that time comes, I will invest in a mix of high-yield dividend payers and thus (hopefully) avoid having to sell stock.

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch
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Elizabeth O'Brien is deputy editor at Money. She has covered retirement and health care for nearly a decade. A Brooklyn resident and mom of two boys, she navigates the alphabet soup of Medicare and the New York City subway system with equal ease. You can email her at elizabeth.obrien@money.com and follow her on Twitter at @elizobrien.

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