Morgan Housel from Motley Fool polled a bunch of his colleagues and a few other bloggers, asking them to sum up their investment philosophies in ten words or less. Of course there is no magic in ten words but the idea  was that philosophy and strategy should be simple. My favorite from the Housel piece was from Michael Batnick who said “avoiding catastrophic mistakes matters more than constructing the perfect portfolio.”
 
I found a couple of other useful one liners in the last few days as well.
 
Related to the Batnick quote is that “you can make more by losing less” which showed up in a sales-y piece that ran on Seeking Alpha, but sales-y article or not the sentiment is valid, at least I think it is, as it has been a major focus of my blogging since 2004. The quote is  about implementing some sort of defensive strategy to avoid the full brunt of the large declines that come along every so often.
 
The SA article didn’t have much substance on how to take defensive action. My preference has been a combination of selling down equity exposure (industrials have historically been hit very hard by bear markets), increasing the use of diversifiers (now commonly referred to as liquid alternatives) and modest exposure to a fund that shorts the market. There are plenty of ways to play defense, the thing that really matters is that if you go to the trouble of going on defense that it works how you intend.
 
Another great quote came from Harry Sit at The Finance Bluff (via A Wealth of Common Sense) who believes that “the goal isn’t necessarily to retire, but rather being able to retire.” The context is early retirement in your 40’s. My framing of this issue has been to believe that by saving aggressively and living below your means you are giving yourself more options, which is important in the context of real world surprises that come along. On another level, you don’t know what the future you might want to do.
 
Related to being able to retire is a short article on Yahoo Finance that says earnings peak for men at 48 and women at 39. There was a cascade of comments from people who said they were in their 60s and making much more than they did in their 40’s but I think they miss the point. To the extent 48 is accurate it is probably a comment about people who find themselves forced out of the workplace in their 50’s, unexpectedly, and before they are ready to retire.
 
Whatever your plan is or whatever you want to do, what happens if your plan changes for some reason beyond your control or because you simply want to make a change? If you don’t have enough yet to retire at 55 but lose that high paying job you will figure it out and make do one way or another. You have to, so what is on the table is how difficult this circumstance would be. If your number for 65 is $1 million and you have $810,000 at 55 then you’re really not in a terrible situation. You may not be where you want to be but you’re going to have food on your table and a roof over your head.
 
If you have $150,000 at 55, then yes, things will be much more difficult, but they were already going to be difficult getting from $150,000 to $1 million in ten years. People willing to downsize meaningfully and take some sort of work they hopefully enjoy even if the pay is quite a bit lower can comfortably adapt.  Of course, this is all the better for anyone already living below their means.
 
Retirement planning is a combination of the above sorts of human factors combined with capital market factors. While most people will need to engage with market factors, human factors are at least as important if not more so because they are more in your control (yes losing your job at 54 is probably not in your control but your ability to adapt probably is). This is one reason I write so many blog posts about alternative retirement ideas and lifestyles that are off the beaten path, my hope is that these topics broaden the conversation.