Why Wealthy Investors Don’t Lose Money in the Stock Market

By Pam Krueger via Iris.xyz

For the record, this has been one of the longest running bull markets in the history of the stock market. But last month, a sudden and dramatic 1,500 point drop in one day (from the Dow’s all-time high) followed immediately by a quick rebound in the same week got everyone’s attention and rattled nerves.

We know that the best way to make money is to not lose it. When you’re wealthy, you can save yourself from making the most common and costly investing mistakes hiring an expert who manages risk by setting the boundaries for you. In fact, it’s one of the first things a competent investment advisor will do for you by drafting an explicit investment policy statement because they know it is critically important to have one.

Pension funds are arguably managing consumers’ most serious money, and they’re required to produce detailed investment policy statements that govern how those trillions of dollars in retirement money will be invested and monitored to make sure their own rules are consistent with the goals of their individual investors. Committees meet and spend hours reviewing the details of these policy statements at least once a year.

Mutual funds and big hedge funds also have to create their own guidelines, as do family offices because they know it’s an essential step in the investing process. But having an investment policy statement is not reserved for the super wealthy. Everyone who has money in the stock market should establish some basic investing ground rules and make those rules their own.

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