The Sunday Drive - 02/09/2025 Edition [#149]

Musings and Meanderings of a Financial Provocateur

A Sunday Drive Around the Internet

👋🏼 Hello friends! Let's enjoy a leisurely Sunday Drive around the internet.

🎶 Vibin'

My colleagues at Investment Research Partners and I had a great meeting in Savannah, GA this past week. It was a very productive gathering and it was awesome to spend time together. Lots of growth lies ahead and the future of our small band of brothers and sisters is very bright indeed.

Shoutout to our newest team member, Ryan who turned me onto Widespread Panic, a band I’d not heard of before. So, this week I’m vibin’ to their great song, Climb to Safety. Enjoy.

💭  Quote of the Week‌

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die in euphoria.“
— Sir John Templeton

BONUS QUOTE
”Life is full of miracles, if your eyes are open.” - Jared Dillian

📈  Chart of the Week

The Merciless Math of Losses

Source: Investment Research Partners, LLC

The Risk No One Talks Enough About

There’s a brutal truth about investing that most people don’t fully grasp until it’s too late: losses hurt a lot more than gains help.

This week’s Chart illustrates this painful reality. If your portfolio drops 20%, you need a 25% gain to get back to even. A 50% loss? Now you need a 100% gain. And if you somehow manage to lose 75%, you’ll need a 300% return just to break even. 😳

Now, imagine dealing with this math right before or right after retirement. That’s when portfolio losses are the most devastating—because you don’t just need your investments to recover, you also need them to fund your living expenses in retirement. If you’re withdrawing money while your portfolio is down, you’re locking in losses, making it even harder for your portfolio to rebound.

This is why I believe the most important decade in your financial life is the five years before and the five years after you retire. The financial industry calls this sequence of returns risk, but all you really need to know is this: if you suffer big losses early in retirement, your odds of having your portfolio permanently impaired rise - a lot.

So what’s the prudent course? Lowering risk. That doesn’t mean stuffing all your cash under the mattress—it means shifting your portfolio to focus on stability and downside protection while still allowing for reasonable growth.

Some key strategies to consider:

1. Increase diversification – Spreading your money across different asset classes (stocks, bonds, alternatives, etc.) helps smooth out the ride.

2. Use options and hedging strategies – Protective puts, covered calls, and other risk-managed approaches can help limit drawdowns.

3. Dial back equity exposure – You don’t need to abandon stocks, but you might not want to be 80%+ in equities if you’re close to retirement.

4. Prioritize income-generating investments – Dividends, bonds, and structured income products can provide stability without relying solely on market appreciation.

5. Keep cash reserves – Having 1-2 years’ worth of expenses in cash helps avoid selling assets at fire-sale prices during downturns.

The bottom line?

What you don’t lose, you don’t have to make back. Avoiding big drawdowns during your retirement transition is one of the smartest things you can do to ensure you don’t outlive your money.

The Merciless Math of Losses doesn’t care how old you are, but you should care about how much risk you’re carrying when you’re about to retire.

🚙 Interesting Drive-By's

📈 Longevity as the Litmus Test for a Great Society

⏱️ In Spite of Time: Why We Waste Precious Moments

👀 Signs - by Jared Dillian

💡 The Future of Living: Rooted in Intergenerational Communities

🤔 There Are No Problems: When You Are Stuck, Think Like a Samurai

There are no problems.

👋🏼 Parting Thought

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If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em (X ‘em?) at me.

Please note that the content in The Sunday Drive is intended for informational purposes only, and is in no way intended to be financial, legal, tax, marital, or even cooking advice. Consult your own professionals as needed. The views expressed in The Sunday Drive are mine alone, and are not necessarily the views of Investment Research Partners.

‌I hope you have a relaxing weekend and a great week ahead. See you next Sunday...

Your faithful financial provocateur,

-Mike‌

If you enjoy the Sunday Drive, I'd be honored if you'd share it with others.‌‌

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