Streetwise for Friday, July 20, 2018

It is interesting or sad, depending on your perspective, to watch how investors react to daily market fluctuations, especially those of the negative variety. How quickly the bravado exhibited during a rising market evaporates. Consider the consternation shown over the tariffs issue that sent the markets sliding downward. Suddenly everyone wanted to exit stage left.

What so many seem to forget, or simply leave out of the equation, is that in the finality of it all subjective human judgment must carry the day. That a carefully selected universe of companies could produce both exemplary earnings and a continuing stream of rising dividends that will effectively stand up to a modest economic downturn, is lost in the weeds.

Always remember that while there is no substitute for human judgment, the human intellect will never be completely immune to the negative influence and ignorance of others.

While there is no dearth of investors who claim otherwise, they are vulnerable to a curse of their own making. A curse that is just as deadly, that of unrealistic expectations. Those obtuse expectations often hide such illusionary notions as an unrealistic degree of hope, wishful thinking, and perhaps a prayer or two.

Frequently those who are dissatisfied or disappointed because their desires for wealth were dashed on the rocks of reality, comment that Wall Street is merely Las Vegas in pin stripped suits.

No, that is simply not true. While some speculative activities could be viewed as a sophisticated form of gambling, investing is not. The definitive reason is that investing revolves around a combination of common sense, research and patience.

Too often investors are tempted to fold their tent due to the Street’s seemingly never ending aberrant behavior. While some is of the Street’s own making, a significant portion can be attributable to the opaque decisions and subsequent actions of the corporate world.

The specter of the unknown can be a driving force that strips away all logic, making rationality impossible. As a result, investors often fall victim to such investment aberrations as Ponzi schemes, investing beyond their skill level, or simply finding themselves imbued with poor financial advice.

Therefore, it is of little wonder that so many look in askance at the idea of investing on Wall Street. Further complicating the issue is that among working adults, about a third have little or no savings. A quarter of those working adults have no savings for retirement. One in five believes they will never be able to retire.

Greeting jobs at Wal-Mart should not become a sought-after form of employment. However, if you really want to put off retirement until you can “call in dead,” then forego building a portfolio of quality dividend paying stocks.

And if you subscribe to the Pollyanna expectation that simply holding a passive or indexed portfolio will save your bacon then there is trouble in the Land of Oz. 

As powerful as compounding is, it can be destroyed by the failure to accept short-term price aberrations. Volatility is never a reason to abandon your portfolio and exit stage left. Rely instead on the precept of investment quality to guide you through the precariousness of Wall Street.

Intelligent investing can counteract the symptoms of never being able to retire. Yet, there will always be those optimists who assume that one day their below average income will exceed their above average spending. Great, we call it the ostrich approach. That lack of foresight also lends itself well to the work-until-you-die lifestyle. Do you want Wal-Mart’s apply-by-phone number?

Oh, while you are deciding about the need for starting or adding to an investment program, keep in mind that the upper range estimate of out-of-pocket medical expenses in retirement for a 65-year-old couple is $235,000 to $376,000.

Those figures double for a couple with above average prescription needs and only Medicare and Medicare supplements. You might want to think about buying a larger piggy bank.

Lauren Rudd is a financial writer and columnist. You can write to him at Phone calls accepted between 9 AM and 3 PM at (941) 706-3449. For back columns please go to