risk
If you've won the game, stop playing
The rule
Once you have enough to meet your goals, take risk off the table. Do not keep risking what you need, just to chase what you only want.
Where it flips
For someone far from their goal, taking less risk is the real danger. They still need growth. 'Stop playing' only applies once the game is truly won.
Bernstein is talking to the person who already has enough for their real goals, but keeps taking share-market risk out of habit or greed. The downside is huge. You may be forced back to work, or miss a goal. The upside is only a little more money. So take risk because you need to, not just because you can. In R0 this links being ready with holding back. The point of the base is to reach a place where you can afford to stop.
A worked example
A couple already has the savings their retirement needs. Staying 90% in shares risks a 40% fall just before they start spending. Moving to a safer mix locks in the win. [illustrative]
How to spot it
- ·risk sized to the goal, not to your appetite
- ·risk lowered as goals come close
- ·no need for a lucky big win to be fine
William Bernstein · The Investor's Manifesto; If You Can