{"id":26135,"date":"2026-03-03T02:32:54","date_gmt":"2026-03-03T02:32:54","guid":{"rendered":"https:\/\/finderica.com\/?p=26135"},"modified":"2026-03-03T02:32:54","modified_gmt":"2026-03-03T02:32:54","slug":"a-painful-lesson-on-retirement-investing","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=26135","title":{"rendered":"A Painful Lesson on Retirement Investing"},"content":{"rendered":"
\n

\u201cTo make it, concentrate;
to keep it, diversify.\u201d
\u2013 The Maxims of Wall Street<\/em>, Page 158<\/p>\n

Over many years, I\u2019ve spoken at hundreds of conferences, including The Oxford Club\u2019s Investment U Conference, the MoneyShow, the New Orleans Investment Conference, the Gold Show, and FreedomFest. I could hold the Guinness World Record in that category if such a category existed.<\/p>\n

The majority of those attending are likely retirees or approaching retirement.<\/p>\n

There is one incident from a conference that I will never forget, and you shouldn\u2019t either.<\/p>\n

In the mid-1980s, I was awakened at 7 in the morning in my hotel room in Los Angeles, where I was speaking at a Howard Ruff conference.<\/p>\n

The man on the other line was upset. He said he had just started to subscribe to my newsletter and needed some advice.<\/p>\n

He had recently sold his business for several million dollars and had invested in a foreign mutual fund that promised 20% annual returns with little risk. It was not one of my recommended funds.<\/p>\n

Everything was fine, he said, until he contacted the fund to make a withdrawal. The foreign operator sent him a check, but the check bounced. When he contacted the company again, they made some excuse and sent another check. That one bounced too. He called the fund on the telephone, and there was no answer.<\/p>\n

\u201cWhat can I do to get my money back?\u201d he begged.<\/p>\n

\u201cI\u2019m afraid you have become a victim of a financial fraud,\u201d I explained, \u201cand because it\u2019s outside the United States, there\u2019s little you can do about it.\u201d<\/p>\n

There was silence on the telephone. I could hear the man sobbing. He said something I\u2019ll never forget.<\/p>\n

\u201cI invested everything \u2013 all my money \u2013 in this fund!\u201d<\/p>\n

Then he added a bombshell with considerable emotion: \u201cAnd I invested my wife\u2019s money too.\u201d<\/p>\n

Talk about a double whammy.<\/p>\n

It was difficult to offer any advice that would comfort this retiree. I had no choice but to tell him that he had to start over \u2013 and go back to work, perhaps \u2013 while relying on Social Security for living expenses.<\/p>\n

He had a sizable home to sell and downsized into a rental property. It was a sad story I\u2019ve never forgotten.<\/p>\n

\u201cInvesting in One Lesson\u201d<\/strong><\/h2>\n

This man had been highly successful by concentrating on his business, which he\u2019d sold for several millions. As Gerald Loeb states in his classic book The Battle for Investment Survival<\/em>, \u201cThe really great fortunes were made by concentration, not diversification\u201d (also quoted on Page 158 of The Maxims of Wall Street<\/em>).<\/p>\n

The man\u2019s mistake was doing the same in investing \u2013 concentrating on one mutual fund that promised guaranteed double-digit profits year after year.<\/p>\n

He should have diversified his nest egg. He did not realize that investing in a business is not the same as the business of investing!<\/p>\n

When you sell your business (or acquire a large sum of money through some other means), you are most vulnerable to being taken advantage of by some salesman who promises high returns with little risk.<\/p>\n

When you are young, you can afford to take risks in business \u2013 or in investing, such as penny stocks, pre-IPO private placements, or non-dividend-paying growth stocks.<\/p>\n

But when you are older and near retirement, it pays to diversify rather than putting all your eggs in one basket.<\/p>\n

Yes, you can invest in penny stocks or other risky stocks, but don\u2019t make the mistake of investing all of your liquid assets in one company, one broker, or one mutual fund. You can invest 15% of your portfolio in high-risk ventures, but not 85%!<\/p>\n

And don\u2019t let greed overwhelm you. I\u2019ve known too many attendees at conferences who see dollar signs in their eyes when they listen to a speaker or talk to an exhibitor.<\/p>\n

Remember, every money manager and exhibitor tells a good story \u2013 but the stories may be exaggerated. Always investigate before you invest (Page 83, Maxims<\/em>).<\/p>\n

Remember the Investment Pyramid<\/strong><\/h2>\n

Money managers and financial advisors often refer to the Investment Pyramid:<\/p>\n

\"Chart:<\/a><\/p>\n

The wide-based investment pyramid doesn\u2019t make a lot of sense when you are young and can afford to take high risks.<\/p>\n

The young investor\u2019s pyramid should look more like an obelisk.<\/p>\n

But once you have made it financially, make sure your nest egg is secure.<\/p>\n

Few retirees are comfortable investing in volatile assets like non-dividend-paying Nasdaq stocks that can rise or fall 10% or 15% in a day. They prefer bank savings accounts and blue chip stocks that pay dividends.<\/p>\n

When you achieve financial independence, diversification is the key, and a broad, conservative base is wise.<\/p>\n

I\u2019ll end with a saying on Wall Street and a Kurdish proverb:<\/p>\n