Fire Drill

*The amount in red above represents the approximate balance that your hypothetical broadly diversified growth-oriented nest egg would have been worth at the end of 1974 had it been invested at the start of 1973 (1973 and 1974 are the worst consecutive post WWII years for stock market investing). This is only a two year period but as you can see the "paper losses" are quite substantial.

Why do we call this a fire drill? This illustration is not intended to scare you away from stock market investing but rather to help you understand the difference between true long-term investing and short-term "playing the market." One of the prices you pay for long-term growth is subjecting your life savings to periodic and unpredictable short-term gut wrenching dips. This will swiftly bring out the human emotion of fear that successful investors must keep in check. At Fox Financial, Andrew stresses that achieving long-tem security almost always necessitates accepting some degree of short-term insecurity. As with a conventional fire drill, the point of this exercise is to make sure that the next time you fear that your nest egg is "burning to the ground" you will react calmly and smartly and in so doing ensure your continued financial safety and well being.