Editor’s Note: This article is excerpted from Brad McMillan’s new book, Crash-Test Investing.
There are many excellent books on investing. Most of them, however, assume you have lots of interest in and time to spend on managing your money. Most people don’t.
In that way, investing is like driving a car. For some people, it is fun and exciting, even a bit dangerous, but for most people, it’s simply a way to get where you want to go as quickly and safely as possible.
Unfortunately, with investing, just as with driving a car, sometimes you get into trouble. When the weather gets bad, when other drivers act irresponsibly, whatever it might be, crashes happen. That’s when you are very glad to be wearing your seat belt.
This book offers a way to invest with seat belts, which can help you survive a market crash with minimum damage. Cars come with seat belts, but investing has been different. The standard belief is that occasional crashes are unpredictable and unavoidable, and people simply must accept that and ride them out.
Historically—from, say, 1950 through 2000—it was possible to do just that. Many people saved, retired, and did well. It made sense to sit tight and ride out any downturns. Indeed, the argument that what has worked in the past will work in the future is a powerful one.
I contend, however, that conditions have changed. With two crashes in the past 20 years—and with market conditions now (in mid-2018) disturbingly like they were prior to those earlier crashes—we’re dealing with a different reality.
Strategies that have worked in the past may not work in the future. Expectations that people have had in the past may not be met. Betting that everything will be the same in the next 20 years as it has been in the past 20 is no longer a reliable proposition.
This book will show you how to invest successfully while significantly lowering your risk of serious loss—even in a crash—without making it a full-time job.
Most Main Street Investors Want Safety