Why capital preservation could be your riskiest and worst strategy for retirement

World peace.Calorie-free cheesecake.

Sensible politicians with your interests at heart.Like all these pipe dreams, investment strategies promising both growth and capital preservation are phony baloney.Fiction.

Yet so many vendors in varied forms – especially in rocky times like this summer’s – claim otherwise, peddling poor products destined to disappoint.Rational expectations are key to successful investing.Growth and true capital preservation can’t coexist in the short run.

However, achieving growth likely means accomplishing both in the long term.Confused? Let me explain.“Capital preservation” sounds appealing and even prudent given the recent chop and fearful election headlines.

But a true capital preservation strategy is wise for far fewer investors than almost anyone imagines.Why? True capital preservation means your portfolio’s value shouldn’t fall – the eradication of potential volatility.Sounds nice – get rid of those stomach-churning ups and downs! Yet volatility and negativity aren’t synonymous.

A 1% rise is similarly volatile to a 1% dip. Here’s what’s crucial – and especially tough for market-addled investors to digest: Volatility is your friend.With stocks, volatility is much more often up than down.

Eliminate the “down,” and the “up” also disappears. Nixing volatility would mean, for example, that you miss out on the 63.1% of calendar months US stocks rose (and 73.5% of all calendar years from 1925 – 2023).Indeed, true capital preservation is limited to ultra-low-returning cash or cash-like vehicles.

Growth? No.Treasury bonds offer better-than-cash long-term returns, but they don’t eliminate volatility, as 2022’s stock-like bond price plummet proved.Bond prices and yields move inversely, mechanically so.

Hence, rising long-term rates slaughter bond returns.Enter inflation.While it soared recently, America’s long-term annual average is about 3.5%, running about 2.5% now.

Ten and 30-year Treas...