Modern Maturity | September 2001 Managing Money

Making the Transition: Modern Maturity

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By James P. Ruth, CFP

A volatile market has put an end to do-it-yourself investing.

If you are 50 or older, you recognize the title of this article as the name of the bimonthly magazine of AARP. Somehow, AARP gets your name in its database and starts mailing you stuff in your late 40s in anticipation of your reaching the coveted "elder" status. My first reaction to this early mailing was denial.

"Why do they want me to join and how did they get my name?" I asked myself. "Certainly, I'm too young to join the geriatric set." I might be gray, but I still have some hair left. And I can still do all the activities of daily living referred to in those long-term care policies. I could even walk 18 holes on the golf course if I wanted to. "There must be some mistake," I thought.

Heck, if I'm going to cave in to the AARP, why not bypass them altogether and just check myself in to a local nursing home? Although my wife joined when she first became eligible, I put up a gallant fight for several years. I refused to surrender my youth and accept senior discounts for movies, hotels and travel. I would proudly pay an extra 10 percent to 20 percent for goods and services for which AARP and other organizations had negotiated discounts because "I wasn't a senior." Every other month, AARP's magazine was delivered to our mailbox, though. I'd toss it to my wife and say, "This is yours."

Several years ago, something changed. We'd been out of town for a week and there was an avalanche of mail to go through when we returned. Among the letters, bills and magazines was the current issue of Modern Maturity. This time I didn't toss it to my wife. Something caught my eye. On the cover was a picture of Paul McCartney-THE Paul McCartney of the Beatles, Wings and rock "n" roll fame. I was stunned!

"Did he know what they had done to him?" I wondered. Surely Paul McCartney does not have to worry about senior discounts when he checks into the Ritz Carlton or gasses up his personal jet. I immediately turned the pages until I found his article only to discover he was 50-something too. Suddenly, I had one of those breakthrough moments, like flying in an airplane piercing through thick, puffy white clouds and in an instant crashing into blue sky and sunshine. I could see clearly.

The end of do-it-yourself investing

So what does all of this have to do with managing money? Well, maybe nothing. However, there are some interesting parallels. We've just come through the 1990s, an era in which investors could break all the rules and still make money. They could buy stocks and mutual funds at high levels and sell them even higher. During the latter half of the 1990s, no self-respecting investor would go to a neighborhood barbecue if he couldn't boast a 25 percent or more investment return while slugging down a light beer and a chilidog. The media created a frenzy around the do-it-yourself investing style known as day trading and raised the practice from obscurity to an art form used by experienced and novice investors alike.

The start of modern maturity

Then the year 2000 began to usher in a new era of reality. Actually it was old reality dressed up in a new suit of clothes-just like AARP's Modern Maturity with Paul McCartney on the cover. The market has plunged from the stratosphere back to earth, as it always does, and investors are reminded once again that the market still moves in both directions and that investing is a long-term proposition. Investors have also learned that while the Internet gives easy access to information, it does not provide them with knowledge and judgement. Most of the day traders of the 1990s discovered that what they really traded was early retirement for a longer career.

Just as I had steadfastly refused to accept the benefits of an organization that would provide me with real value, so have some investors turned away from professional advice to obtaining information and advice via the Internet. My breakthrough moment was a rock icon on a magazine cover while theirs was a roller coaster stock market plummeting down the last cliff-like drop with a full load of thrill seekers. With a clearer vision, these former thrill seekers once again discovered the value of professional advice and advisors.

Suddenly diversification and asset allocation made sense again. Maybe this is just a process of modern maturity that all of us should experience.

James P. Ruth, CFP, is a registered representative and president of Potomac Financial Group, a financial-advisory practice in Gaithersburg, Md., He can be reached at 301-948-3900 or pfgroup@erols.com.

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