Three Essential Wealth Protection Principles from Psychology of Money | Dupree Financial Group

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Three Essential Principles for Protecting Your Wealth in Today’s Market

Markets are at record highs again. If you’ve been diligently dollar-cost averaging into your 401(k) for years, watching your portfolio grow, you might be feeling pretty good right now. But here’s a critical question: Have you adjusted your risk management to match where you are in life today?

At Dupree Financial Group, we recently revisited some key concepts from Morgan Housel’s excellent book, The Psychology of Money. These principles are especially relevant in today’s market environment, and they might change how you think about your investment strategy.

The Paradox of Making Money vs. Keeping Money

Housel makes a fascinating observation: “Getting money requires taking risks, being optimistic, and putting yourself out there. But keeping money requires the opposite of taking risk. It requires humility and fear that what you’ve made can be taken away from you just as fast.”

For years, you’ve been an optimist—investing in your 401(k), believing in human ingenuity and the ability of companies to create value. That optimism has likely served you well. But as your portfolio has grown and you’ve moved closer to retirement, have you adjusted your approach?

The risk you were taking at 35 shouldn’t be the same risk you’re taking at 60. Yet many investors continue with the same aggressive allocations simply because “it’s been working.” That’s not a strategy—that’s momentum, and momentum eventually stops.

Understanding “Enough”

One of the most powerful concepts in Housel’s book is the idea of “enough.” This isn’t about being conservative or afraid to grow your wealth. It’s about clearly understanding what happens if things go wrong.

If you make this investment and it doesn’t work out, will it derail your retirement goals? That’s the question that matters.

Having “enough” means you can identify a baseline—a number that allows you to accomplish your goals. Once you have that baseline, you can make informed decisions about risk. You can look at your portfolio and ask: “Do these numbers work for me now, where they are today?”

With markets at current valuations and some investors heavily concentrated in high-flying tech stocks, this question has never been more important. Yes, you might have been rewarded for that concentration. But is the additional risk still worth it if you already have enough to meet your goals?

What Should Never Be Risked

According to Housel, there are some things that should never be risked, no matter the potential gain:

Reputation – In our business, reputation is everything. It’s all we have, and it’s all we’ll ever have. We learned this lesson early when an energy partnership we recommended didn’t work out as planned. Even though legally we weren’t obligated to make clients whole, we did—because our reputation was worth more than the potential loss.

Happiness and Peace of Mind – True wealth isn’t just about a number on a statement. It’s about having the freedom to make choices, to sleep well at night, and to do what’s right when the opportunity presents itself. We’ve seen clients with substantial portfolios who aren’t happy because they’re constantly worried about market volatility. And we’ve seen clients with more modest portfolios who sleep soundly because their investments align with their goals and values.

Freedom and Independence – The real value of wealth isn’t in consumption—it’s in the flexibility it provides. The ability to choose what you do with your time, to help family members in need, to support causes you care about—that’s what financial independence really means.

Reasonable Beats Rational Every Time

Here’s something most financial advisors won’t tell you: life isn’t a spreadsheet.

From a purely mathematical standpoint, it might not make sense to pay off a 3.5% mortgage when you could potentially earn more in the market. But if paying off that mortgage helps you sleep better at night and aligns with your values, then it’s the right decision for you.

We call this being “reasonable” rather than purely “rational.” Reasonable takes into account your feelings, your values, and what makes sense for your life—not just what looks best on paper.

The Investment Strategy Application

This principle applies to investment strategy too. Right now, many investors are actively trading stocks, caught up in the AI and tech frenzy. They’re buying this stock, selling that one, assuming they can beat the market over the long term.

Here’s a sobering statistic: Over the last 15 years, 96% of large-cap growth mutual funds have underperformed their benchmark index. These are funds managed by teams of professional researchers with access to resources that individual investors can’t match. If they’re struggling to beat the index, what are the realistic odds for individual stock pickers?

This doesn’t mean individual stock ownership is wrong—far from it. But the strategy needs to be reasonable and sustainable. At Dupree Financial Group, we focus on generating income streams through dividends and interest from quality companies. Our clients understand what they own and why they own it. When markets get volatile—and they always do eventually—this familiarity and understanding helps them stay the course.

Because here’s the truth: compounding only works if you give it time. And you can only give it time if you don’t panic and sell at the worst possible moment.

Wealth Is What You Don’t See

Here’s a final insight that might change how you think about money: wealth is invisible.

When you see someone driving a $100,000 car, the only thing you know for certain is that they’re either $100,000 poorer than they were before or they’ve taken on debt. That’s it. That’s all that purchase tells you.

Being rich is about consumption—it’s what you can see. But wealth is what’s building up behind the scenes, hidden from view. Wealth is the gap between what you earn and what you spend, compounded over time.

Think of it like exercise. One study found that people overestimate the calories they burn during a workout by a factor of four. They think, “I worked out, I deserve a reward,” and end up consuming more calories than they burned. The net result? Weight gain, not loss.

Wealth building works the same way. You might have money coming in from various sources, but if your spending increases proportionally (or worse, exceeds your income), you’re not actually building wealth—you’re just funding a lifestyle.

Making Your Money Work for You

After 47 years in the investment business, here’s what we know: The key isn’t timing the market. It’s understanding what you own and why you own it.

It’s about switching from an income-making role to an income-producing role—making your money work for you rather than constantly working for your money.

Markets don’t always go up. They go sideways, they go down, and yes, sometimes they go up dramatically. But when you have regular income needs—monthly withdrawals, required minimum distributions, or simply the need to fund your lifestyle—you can’t rely on the unpredictability of market growth alone.

This is why we focus on dividends and interest income. It’s more predictable, more consistent, and it allows your principal to keep working for you even when markets are volatile.

Know What You Own

If there’s one takeaway from all of this, it’s this: If you don’t know what you own in your portfolio, you need to.

With markets at current valuations, with the dramatic concentration in certain sectors, with interest rates and economic conditions in flux, now is the time to take an honest look at your portfolio and ask:

• Does my current allocation match where I am in life?
• Do I understand what I own and why I own it?
• Have I identified what “enough” means for my goals?
• Am I taking unnecessary risks with things that should never be risked?
• Is my investment approach reasonable for my situation, or am I just chasing returns?

These aren’t easy questions, but they’re essential ones. And you don’t have to answer them alone.

At Dupree Financial Group, we’ve spent decades learning from our clients—seeing what real wealth building looks like, understanding the mistakes to avoid and the strategies that work. We’re here to help you make sense of your portfolio and create a plan that aligns with your goals and values.

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Frequently Asked Questions About Wealth Protection

What’s the difference between making money and keeping money?

Making money requires taking risks, being optimistic, and actively pursuing opportunities. Keeping money requires a different mindset—one focused on humility, risk management, and understanding that what you’ve built can be lost just as quickly as it was gained. As you approach retirement, your investment strategy should shift from aggressive growth to protecting what you’ve accumulated while still generating income.

How do I know if I have “enough” money for retirement?

“Enough” is the amount you need to accomplish your specific goals without taking unnecessary risks. To determine this number, work with a financial advisor to calculate your expected expenses, desired lifestyle, healthcare costs, and legacy goals. Once you know your baseline “enough” number, you can make informed decisions about whether additional risk in your portfolio is truly necessary or just greedy.

Should I pay off my mortgage before retirement?

From a purely mathematical standpoint, it may not always make sense to pay off a low-interest mortgage when you could potentially earn more in the market. However, many retirees find tremendous peace of mind in entering retirement debt-free. This is a perfect example of choosing what’s “reasonable” for your situation over what’s purely “rational” on paper. The right answer depends on your interest rate, tax situation, risk tolerance, and personal values.

What percentage of mutual funds actually beat the market?

Over the last 15 years, only 4% of large-cap growth mutual funds have outperformed their benchmark index. This means 96% of professionally managed funds with teams of researchers underperformed a simple index. This statistic highlights why individual stock picking is so challenging and why having a clear, sustainable investment strategy focused on quality companies and income generation often makes more sense for retirement investors.

How should my investment strategy change as I approach retirement?

As you near retirement, your focus should shift from pure growth to income generation and capital preservation. This doesn’t mean abandoning stocks entirely, but it does mean reassessing your risk exposure and ensuring your portfolio can generate the income you’ll need without forcing you to sell assets during market downturns. A dividend and interest-based strategy can provide more predictable cash flow than relying solely on capital appreciation.

What’s the difference between being rich and being wealthy?

Being rich is about consumption—the visible signs of spending like expensive cars, homes, and vacations. Wealth, on the other hand, is what you don’t see. It’s the gap between what you earn and what you spend, compounded over time. Wealthy individuals focus on building assets that generate income and provide freedom, rather than funding a lifestyle that requires constant work to maintain.

Why is dividend income better than relying on stock price growth?

Dividends provide predictable, consistent income regardless of market volatility. When you need to withdraw money from your portfolio during retirement, relying solely on stock price appreciation means you might be forced to sell during a downturn, locking in losses. Dividend-paying quality companies provide cash flow that doesn’t require selling shares, allowing your principal to remain invested and continue compounding over time.

How often should I review my investment portfolio?

At minimum, you should conduct a comprehensive portfolio review annually. However, major life changes—approaching retirement, receiving an inheritance, selling a business, or significant market movements—warrant immediate reviews. The key is ensuring your portfolio allocation still matches your current life stage, risk tolerance, and goals, not just continuing with the same strategy because it worked in the past.

What should I look for in a financial advisor?

Look for an advisor who takes time to understand your complete financial picture, not just your investment accounts. They should be able to explain what you own and why you own it in clear terms. Ask about their investment philosophy, how they’re compensated, and whether they have experience working with clients in your specific situation. Most importantly, find someone who values protecting your wealth as much as growing it.

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Ready to take a closer look at your portfolio? Call us at 859-233-0400 or schedule a complimentary portfolio review directly on our website at dupreefinancial.com.

Dupree Financial Group – Where we make your money work for you.

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