Feb 28, 2020 4 min read

I recently was in Las Vegas on a business trip. During my journey, I witnessed several things that apply to financial planning.

The Strip is lined with huge, beautiful casinos. Millions of people go to Vegas every year to try to win their fortunes. There are fabulous shows all over the place and every restaurant choice imaginable is there. Prices paid at the casinos can often be beaten in smaller stores outside on the streets.

When visiting this city, just like in financial planning, you must have a plan or you could go broke. The planning starts before you arrive. You may be offered deals on hotel rooms. It is not until placing your order that all of the taxes and fees show up on your order form.

Travel destinations like Vegas love to tax tourists. They have to pay the high taxes and they do not get to vote the politicians out of office.

When you walk around the casinos, you see people pouring lots of money into the slot machines and onto table games. What you do not see is many people winning big money.

The gaming companies know you have to win some small prizes to keep you playing and interested. Even though Nevada state gaming fees are lower than Pennsylvania’s casino fees, a big chuck of possible winnings is off the table – it goes to the state. It also costs casinos lots of money to build and maintain these properties. They also must earn a return on their investor’s investment. Many of these gamblers are not considering all of the risk.

People who lose most often believe they will win back all of their losses with the next hand at the table or pull of the lever. They take more risk, but believe they are immune. When people have a couple of hundred thousands saved for retirement, another hundred thousand can mean a lot. If they have a million or more saved, an extra little bit does not mean as much.

A 12-year bull market makes many people feel invincible. Some believe they can beat the house.

People forget that the lost decade was not all that long ago. People who put $100,000 into the Standard & Poor’s 500 on January 1, 2000, took 12 years to break even after the crashes in 2001 and 2008.

If you are a quarterback and throw an interception, a short memory is important. This may not be true for investors. I know some very intelligent people who believe they can continue to earn these incredible rates forever.

When a market is priced for perfection, there is little room for error. That is what we see going on right now with the Coronavirus. The last 12 years have been a nearly perfect environment for stocks. Interest rates were at record lows and inflation remained in check. It will be hard to duplicate this environment in the future.

Environmental factors do make a difference that we cannot ignore. My flight to Vegas took almost five hours. The flight home was just over three and a half. It is the same number of miles going both ways. What was the difference? A 170-miles-per-hour tailwind behind us going home. Reaching Vegas, you are fighting headwinds.

The market usually provides the highest returns if you have enough time. You cannot wish away risk and ignore risk just before or early in retirement can destroy years of great gains. Have a plan and don’t be greedy.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.