Planning for Retirement

In Plan Your Prosperity, Ken Fisher demonstrates how you can better prepare for retirement by planning ahead, being aware of investor pitfalls—including investing myths.

For example, just because stocks historically have returned roughly an annualized 10% doesn’t mean they return 10% each year—annualized returns are an average over long periods of time. Meaning some years stocks may return much more, but also some years stocks will be down more. Therefore, it’s unrealistic to believe you can skim 10% off the top each year without impacting long-term survivability of your portfolio. Known as the “10% Myth,” this is covered in more detail in the book, along with these other common pitfalls:

  1. “Capital preservation and growth” as your investing goal—Not possible! Growth requires volatility. Capital preservation requires none. These goals are not synonymous.
  2. Age doesn’t equal asset allocation—A realistic assessment of your goals and objectives provides much more insight to asset allocation than age alone.
  3. Ignoring opportunity cost—Investors all too often underestimate how much growth they need because they are ultra-focused on just one kind of risk— volatility risk.
  4. Unrealistic expectations—Not understanding what’s “normal” for stock returns can increase the odds you get scammed by a Ponzi con artist. Average returns aren’t normal. Normal returns are extreme.
  5. The All-High Dividend Portfolio—Primarily relying on high dividends and coupon payments is potentially a harmful way to get retirement cash flow.

To avoid pitfalls like these, Plan Your Prosperity guides you through proper steps of retirement planning, like selecting an appropriate benchmark. Picking an appropriate benchmark is critical to long-term investing success, yet many investors don’t do it. They may not even know what a benchmark is or that they should have one! This book gives you principles and concepts they can use to better pick for themselves an appropriate benchmark, or have more productive conversations with a professional.