In one of the most famous scenes in movie history, Clint Eastwood’s legendary character – Dirty Harry – has caught up with his perp after a frenzied chase during which Harry Callahan had taken several shots and missed.
Drawn down on his now cornered suspect, Dirty Harry says:
“I know what you’re thinking. “Did he fire six shots or only five?” Well to tell you the truth in all this excitement I kinda lost track myself. But being as this is a .44 Magnum, the most powerful handgun in the world and would blow you head clean off, you’ve gotta ask yourself one question: ‘Do I feel lucky?’ Well, do ya, punk?”
It was a great scene from one of the greatest actors in history. But what does it have to do with money and investing?
Just look at the last line again – ‘do you feel lucky?’ Equity markets are on a spectacular, (almost) six-year bull run. If you have money in the market, its’ been nothing but black ink since 2009.
The reason this is so significant is that over the last 143 years, the S&P 500 has been down in 40 of those years. In other words, 28% of the time – the S&P 500 is down – 78%, it’s up.
The current (almost) 6-year winning streak means we’re substantially closer to the next “correction.” When will it come? Who knows? But it’s a mathematical certainty that a losing year is coming – and statistically – it can’t be far off.
And that leads us right back to Dirty Harry – and you. “Do you feel lucky?” Or – have you put a plan in place that will allow you to continue capturing the market’s upside – while protecting your money from its downside?
If you have – you can sit back, relax, and know that when the day comes – neither you nor your money will suffer as a result. If you’ve not – you’d better be feeling lucky. Just remember, ‘luck’ is not a plan.
Locking in the upside while locking out the downside is possible. You just have to know where to look.