With each and every investment that you make, you're going to be giving up one benefit in exchange for another. Most of the time, this trade-off is between risk and potential return. Understanding this trade-off at a conceptual level will go a long way in helping you to select the right investments (or strategies) on your path to retirement.
The unfortunate reality is that nothing in this world is certain. In fact, the only thing in life that is certain ... is that nothing is certain. This is especially true when we talk about money and investing. Since we can't deal with certainties, we're forced to deal with probabilities. Therefore, probabilities become the lens through which we must view all things investment related.
Anyone who's been around for longer than a couple of decades knows that stocks can lose a lot of value quickly. These periods, when stock prices are falling, can be classified into two types of declines: corrections, and bear markets. Understanding the difference between these is critical, because the former represent minor speed bumps on the way to higher prices, while the latter can wreck your entire portfolio and set you back years from reaching your retirement goals.
Have you ever wanted to be a business owner? Well, congrats ... you already are. The minute you have even a few thousand dollars to your name, you're officially a professional money manager running your own investment firm. Of course, you probably don't see it that way, but that's because you haven't been enlightened yet. No one has ever spelled it out for you before. Well ... it's time to fix that.
For most investors, the idea of "getting out at the top" is as illusive an idea as winning the lotto, or licking your elbow. The chances of picking that one magical day just seem too low to be probable. But is it really that tough? Or do most investors simply have a poor understanding of how stock market tops develop?