Could Lightning Strike the Stock Market Twice?

Could lightning strike the stock market twice? 

Here’s a rather simple question for you to answer about your retirement portfolio: What happens in the worst-case scenario that the stock market takes a rather huge plunge, like it did in September 2008?

Of course, like many in the financial planning community/press would have you believe, that’s highly unlikely, right? But how unlikely is it?

In my defense, I did describe it as the worst-case scenario. More likely than not, that’s not going to happen again, but isn’t such a suggestion pure speculation on my part? The thing is, simply hoping – or even strongly believing, as many financial experts apparently do – that the stock market will only move in a certain direction isn’t a sensible retirement strategy. In fact, I’d be willing to bet that prior to the 2008 market crash, many of those whose retirement dreams were completely dismantled or seriously damaged didn’t think anything of such a magnitude could happen, especially to their hard-earned nest eggs.

Five years have passed since the infamous crash, and while many in the financial planning community seem to have forgotten or moved beyond what happened, I personally think that any retirement investor who doesn’t take a hard look at their portfolio, and simply goes with conventional wisdom flow, is making a rather unfortunate mistake. 

Please don’t take this as a caution about not investing in the stock market, because that’s not my point here. Not to mention that I couldn’t make such a recommendation without having had any consultations with you. What I’m hoping to do here is encourage you to thoroughly understand both the best and worst possible outcomes for whichever strategy you are using. And, most important of all, make sure that your assumptions and those of your financial advisor or the media money guru you’re following belong in the real world and not fantasyland.

Perhaps you have heard that the market has fully recovered and the outlook is great. But that still begs my very simple question: What might happen to your retirement livelihood if the market were to tank? Could it happen again? Since the nature of the stock market is to go up AND down, of course it could. It might be a while till we see such a severe crash again, but if lightning can strike the same spot twice, another big market crash is always possible.

By the way, ask any of those retirees (or those who were nearing retirement) whose portfolios took a beating after the 2008 crash if they have recovered – as in, earned back all of the seed money + interest that they lost – and let me know you can find anyone who has.

Here's the bottom line. Ask the hard questions before it's too late, because the price could be unbearable. Remember, it's your money and your retirement that are at stake here.

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