How to minimize penalties in your portfolio as retirement approaches

One thing that NFL rookies will have to get used to during today’s first Sunday of the football season is how much faster the game moves at that level. No disrespect to college players, but the pro game happens at an accelerated pace.

Likewise, stock and bond markets now move much faster than they used to. Information is easy to find, commonly available, and the whole world can literally watch and react. Market price moves that used to take weeks or months to occur now happen in a day.

NFL rookies are probably more likely than veterans to commit penalties, and cost their teams some yardage during their games. They may also be at greater risk of being penalized in ways that can determine the outcome of the game. We have all heard the announcer say something like “they are picking on the rookie cornerback,” or “he’s a rookie quarterback, so he is not used to getting hit that hard.”


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While this may be exciting for young investors and traders of all ages, if you are retired or within 10 years of when you aim to retire, that faster speed can be uncomfortable. In fact, it can be downright intimidating.

Avoid “rookie mistakes”

If you have made it most of the way toward accumulating the assets you think you need for a comfortable retirement, the last thing you want to do is make “rookie mistakes.” In addition, there are plenty of experienced NFL players that commit costly penalties as well. It is the same with investors. Just because you have been investing for a while (on your own or with some guidance), when the game speeds up, how confident are you that you will win the way you did in the past? This is a particularly important question as we sit here, 10 years into a bull market for stocks, and after 40 years of generally falling bond interest rates.

The game has changed. It is not just the speed, it’s the whole nature of how markets work, and who the players are, so to speak. Hedge funds, indexers, and high-frequency traders were a very small part of the “league” 20 years ago. Now, they dominate the activity. For the investor who simply wants to protect capital, grow it a bit, and avoid major landmines, it is not like the old days.

After all, investment management is about more than deciding to be “in the market” or “out of the market.” And, simply “staying the course” when there may be serious issues in your portfolio is a retirement lifestyle risk.

NFL penalties you can learn from

I think we can learn a lot about how to persevere in this environment by comparing some key investor errors with NFL penalties. That way, when you are thinking about your portfolio decisions, you can translate them to football language. For some, that is their worst nightmare. They hate football. But in hopes of reaching out to football fans in a language we both understand (and more familiar than Wall Street language), here are some common National Football League penalties, applied to investors.

Delay of Game: 5-yard penalty

Many Baby Boomers have recently realized that their path to retirement is too reliant on what the stock market does. This might have just dawned on them because for 10 years, it has been a blissful ride for stocks and general, and the U.S. market in particular. Now, with talk of recession and bear markets, or at least a slowdown in growth potential, they may not have enough to retire when and how they wish.

In some cases, they delayed truly prioritizing their retirement investing plan. And that took valuable time off the clock, so to speak. The good news is that unlike an NFL game, the clock does not just run out. People can modify their path toward retirement in a number of ways, including how they invest, how long they work, and how they can alter their savings habits as retirement approaches. The one thing they can’t do is procrastinate.

Pass Interference: 15-yard penalty

I call this one on the mainstream media and the big, impersonal investment firms. They appear to be trying to help, and in many cases they are. But there is plenty of self-serving behavior out there. Unless a financial advisor is truly committed to the “fiduciary” level of care (the client’s needs are always prioritized over your own), there is room for “interference” between the firm’s objectives and yours. Shake free of this, so they don’t stop you from moving the ball down the field, so to speak.

(Buy and) Holding: 10-yard penalty

I used to be like most of my industry. My advice was to buy quality stocks and funds, and let time be your ally. That was in the late 1990s. Then, investment speculation and hype convinced me that simply buying and holding as a rule was outright dangerous. Sure, it can work for years at a time. But it ultimately ends up being a timing decision without you realizing it. If you are retiring in a few years, you can’t afford to “just hang in there” during a bear market like you could 10 or 20 years ago.

That is why I have been a hedged investor for over 20 years. It is a balancing act. Try to own some of your investments, but don’t be afraid to rent some, too (i.e. hold them for weeks or months and not years). This is not “trading.” It is diligent risk management. Especially for the retired or pre-retired, I just don’t see any other way, unless you have so much money, you could never outlive it in 5 generations. And if that’s the case, congratulations.

Illegal Formation: 5-yard penalty

Of all the penalties I see when reviewing portfolios, this may be the most common. So many in the financial advice business hold themselves out as “asset allocators.”

I am all for efficiency, not for putting people in neat, self-serving allocation boxes that are left untouched, but for regular “rebalancing.” This is a bull-market friendly approach that will be seriously disrupted in the event of a bear market in stocks, a sustained rise in interest rates, or both. 60/40 portfolios, et. al. sound good and look pretty. But they may not get the job done at the time of your life when you need it most. Count me among those who still think that building portfolios based on more than a couple of quickly determined factors is the better way to roll.

Too Many Players on the Field: 5-yard penalty

Financial advice firms have multiplied like greedy rabbits. This has created plenty of confusion for the consumer. Some firms are fiduciaries, some are not. Some practice financial planning and some use financial planning as a “hook” to sell insurance. Others manage investment portfolios, or real estate, or private funds. The bottom line for you is to get a direct understanding from whoever you interact with. Determine what they do and don’t do if it applies to your specific situation, and how they are paid. What is their incentive to deliver what you seek?

Post-Game Show

While these “penalties” can act as hurdles on your way to achieving what you want in your investment portfolio and retirement vision, however, they are not game-breakers. As with so much of what I write about at Forbes.com, my goal is to make you think. I want to act as sort of a financial conscience, based on 33 years of having seen Wall Street and investor behavior from many angles.

If you accumulate a lot of penalties it will make it tougher to win the game. However, if you cut down on these inhibitors to progress, you stand a much better chance of the scoreboard turning in your favor.

As the pros say, you must “play 60 minutes” to win the game. You can’t afford big letdowns. Stay focused, and be innovative. Give your all on every play. And to paraphrase the classic movie line, go out there and win one for the Gipper…and the Gipper, is you.

This article was written by Rob Isbitts from Forbes and was legally licensed by AdvisorStream through the NewsCred publisher network.

Matthew A. Helfrich profile photo
Matthew A. Helfrich
Partner and President
Waldron Private Wealth
Office : 412-221-1005