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How would you feel if you lost over 78 percent of your retirement investments in one bad market?

I'd been doing a weekly radio show for four years when I was asked to speak at the “Managing Your Money” conference in Arlington, Texas. After my presentation to some 4,000 attendees, I walked offstage to find a man in his late fifties waiting for me. He said, “Ken, glad to meet you. I listen to your radio show every week.”

“Thanks,” I said, shaking his hand.

“Do you know how much money I had before this last bear market?”

This was 2002. The tech bubble had recently burst. I was afraid this was going to be a sad story. “No,” I said, “how much did you have?”

“Three million dollars.”

“Wow, that's great,” I said. “Congratulations.”

“Do you know much money I have now?”

I shook my head, bracing myself.

“I have $650,000.”

I remember looking at the man. I couldn't believe he was standing, let alone smiling. “But tell me,” I said, “To go from $3 million to $650,000, you had to see your investments drop to $2.5 million, then $2 million, then one and half…There were signposts along the way. Why didn't you get off the ride?”

And he said, “I had every intention. I planned to get out if my investments ever dropped down to two and a half million. But when they went down that far, I thought to myself, ‘I'm down $500,000. I can't sell now. That'd be ridiculous.’”

I had the feeling I knew where he was going.

He continued: “So I drew a line in the sand: If my investments went down to $2 million, I'd sell for sure. But when they sank to that point, I did the same thing. I said to myself, ‘Oh no, I'm down $1 million. I can't sell now, because the market will come back. I don't want to be the fool who sells at the bottom.’”

He went on. “Everybody was telling me that the market was going to bounce back. I didn't want to miss the rebound.” He shook his head. “I never got out. I rode the market all the way to the bottom, and lost more than 70 percent of my money.”

I wanted to say something encouraging to this poor guy, so I said, “I admire your ability to smile.” I meant it.

“I could smile, or I could cry,” he said. “I choose to smile.”

The Inspiration behind This Book

I don't want you to end up like that former millionaire. I want you to smile because you're playing with your grandkids, perfecting your golf game, or dancing on the beach with your spouse. I don't want you to have to go through the pain of losing the retirement you've earned. You worked hard, and you've looked forward to this time in your life. I want it to be the best time in your life. I want your retirement to be like your second childhood without parental supervision.

And I want to help you get there. I want to convince you of the need to buy, hold, and SELL. In today's financial world, you face volatile markets, huge deficits, and even the risks of governments going bankrupt – all of which add up to the possibility of huge losses. With those prospects, I think it's just plain irresponsible to simply ride the market. You need to have a proactive plan that includes a sell strategy.

But it's not easy. You've probably heard the same advice the unlucky investor followed. “The market will come back. Don't be the fool who sells at the bottom. You don't want to miss the rebound.” It's popular advice. If you Google “investment advice,” you'll probably find information that tells you to “hold forever” and “just diversify.” I've worked as a financial advisor since 1988, and have heard these buy-hold myths propagated on the investing public over and over again. Sometimes I've heard them from people like the man in the story; investors who believed in the myths that later destroyed their retirement dreams.

In Part One of this book, we'll discuss the reasons why buy-hold is a bad idea. In Part Two, we'll debunk the myths that may keep you from being proactive. In Part Three, we'll explore the ways to use a sell strategy. And we'll have some fun doing it along the way, with the help of a few of my favorite TV characters.

By understanding that most buy-hold recommendations are indeed myths, you'll be able to stand your ground when necessary. You'll be able to execute your sell strategy with confidence. You won't be just another placid sheep that blindly follows the rest of the flock right off a cliff.

If you're retired or close to retirement, you cannot afford to be a sheep, or, to mix metaphors, to go along for the ride, allowing your investments to chauffeur you around. You have to be in the driver's seat. You have to be proactive, and very, very disciplined so that you can avoid the losses that could ruin your retirement. Remember the gentleman in our story? If he had stuck to his guns and said, “Okay, my investments are down to two and a half million. I'm out,” he would have felt the pain of losing half a million dollars, but I suspect that was nothing compared to the way he felt when 78 percent of his money disappeared.

Protect your well-deserved retirement. Though nothing is certain in the world of finance, you can take action with your investments, and help avoid devastating losses. The first step? Read on, so that you can arm yourself with the knowledge that buy and hold is really just buy and hope, not a viable investment strategy – especially for anyone over 50.