Should Investors Play Offense, Defense Or Both?

At what point should investors switch from aggressively investing for profit to preservation of capital? When do you switch from offense to defense? Is it possible to do both at the same time?

Shortly after the 2008 bank bailout, I was asked to write a financial newsletter for baby boomers. The firm had a great track record investing in metals and oil stocks, proudly boasting many “10-baggers.” They focused on high risk, extraordinary return investments and attracted like-minded investors. If one struck gold or oil the spectacular returns would dwarf the other losses. Many subscribers made a lot of money following their recommendations.

Each year they sponsored a conference, with a cadre of big-name speakers. The theme of my first conference was how to invest safely in the new low interest environment, with the threat of inflation looming on the horizon. How do investors safely protect their wealth?

At 70 years old, I was both the old guy and new guy; an unknown name on the drawing card. I was allocated minimal time behind the microphone.

I took the microphone and looked at the audience. The vast majority of participants looked like me, grey hair and all. Most had accumulated a nice nest egg. They were concerned about protecting their wealth and buying power?

Intuitively, I changed my opening remarks, saying something like:

“Defensive investing is not that big a deal. There are times when you take profits, consolidate, reduce the portion of your nest egg allocated to high-risk investments and seek conservative investments to grow and protect your wealth and buying power.

I see a lot of grey hair. Most of you have started this process, either consciously or intuitively.

Expect historic low interest rates for the foreseeable future. Much like a football quarterback protecting a lead, we must look at the landscape, then run the plays that will give us the best opportunities for success and do everything to avoid catastrophic losses. Keep moving forward.

Our publication focuses on educating subscribers how to do that safely in the current investment climate.”

After my talk, several long-time subscribers approached me. Many paid thousands of dollars for “lifetime membership” and were part of the inner circle. Their comments were consistent. They were getting closer to retirement, had accumulated a good bit of wealth and needed to protect it; they needed to revise their investment game plan. They told my boss, “This guy understands my problem.”

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