Take These 6 Urgent Steps to Avoid “Negative Wealth Shock”

The Effect of Negative Wealth Shock on Life Expectancy

Most of us take practical steps to maintain good health.

We promise to eat less sugar, fewer refined carbs, and more leafy greens and antioxidant-filled fruits.

We resist binge-watching that new Netflix series to spend time outside or in the gym.

We try to stop smoking, use alcohol in moderation (or not at all) and put on sunscreen before we head to the beach.

But if you truly want to protect your health, there’s something else you need to do: Turn down the risk in your portfolio.

According to a study in the Journal of the American Medical Association (JAMA), losing a significant percentage of your wealth isn’t just an unfortunate development.

As the chart above shows, it’s as bad for your life expectancy as being broke.

Social scientists have recognized for years that rich people in this country live longer than poor people.

In fact, a study co-authored by two MIT researchers found that the richest 1% of men live 14.6 years longer than the poorest 1% of men. (Among women, the difference is 10.1 years on average.)

There are several reasons for this.

Poor people live in more dangerous neighborhoods. They are less likely to get preventive medical care. And their diets are far less healthful.

Indeed, people on government-subsidized food programs – 56% of the population – have the worst health, including higher risk for obesity, diabetes, inflammation and high cholesterol. (The No. 1 item purchased by food stamp recipients is soda.)

Yet taking a serious hit to your investment portfolio can negate all the advantages of a richer, healthier lifestyle.

According to JAMA, you’re 50% more likely to die within 20 years of losing most of your assets.

That’s about as large a mortality effect as a diagnosis of heart disease. And it holds true even when existing health problems are factored in.

It didn’t even matter if people were affluent before and after the downturn. It was simply that they experienced a significant loss.

(And the grieving that goes with it.)

Moreover, the study found that a full quarter of Americans 51 and older experienced what they called a “negative wealth shock.”

If that number seems high, think back to the Great Recession.

It came on the heels of everyday folks flipping pre-construction condos, buying subprime mortgage securities and trading stocks on margin.

We all know individuals who lost a significant chunk of their retirement savings… or even filed personal bankruptcy.

You don’t want to become one of those statistics. And you don’t have to. There is plenty you can do about it today.

The current bull market is nearly 10 years old. That has bred complacency.

Many folks have more money in stocks than they’d be comfortable with in a secular bear market.

They are buying lower-quality securities, like biotech stocks without significant revenue – that can easily lose half their value after a bad clinical trial – and “junior” mining stocks that don’t produce anything except a steady stream of press releases.

While full-on euphoria is not here yet, in my view, too many folks are trading options, futures and cryptocurrencies. They are buying …read more

Source:: Investment You