Retirement Guys: Don’t be an emotional investorWritten by Nolan Baker Mark Clair | | firstname.lastname@example.org
Humans tend to make very poor emotional decisions when it comes to dealing with their finances. These emotions can often lead to bad choices that cost real dollars. For example, if an investor with $500,000 lost 20 percent with no exit plan in place, that would cost them $100,000. So are you a bull, a bear or a bulldog?
The “Bull” is almost always positive on the stock market, oftentimes refusing to acknowledge when the market is going down again. We hear things like “I just want to wait ’til I get back to even” and “my statement was up last month, I want to wait and see what happens.” We probably all have a little bull in us since most of our parents taught us to focus on the positives in life. In part they were right; we should all focus on the positive.
Nobody wants to surround themselves with people who focus on the negatives. An investor needs to carefully weigh the positives and negatives before going forward. Making bull decisions based upon the past is like looking in the rearview mirror, which should only be done if you want to go backward.
When the trend of the economy is negative, reduce the risk. One way this can be done is selling equities and moving money to cash. Look at the trends, if things aren’t positive, don’t let emotions get in the way. Know when to exit and take winnings off the table.
The dramatic rise in stock market volatility, international debt concerns and stock market declines below the “200-day moving averages” are trends that concern us. The higher the volatility, the more the stock market goes up and down.
The bear focuses on the negatives and ends up usually going nowhere. In the investment world, the bear investors tend to keep all of their money in safe fixed accounts. If that money is in a retirement account and an investor is earning one-half percent is that really a positive return? Once an investor factors in taxes and inflation, the return is still negative. The way a bear can win is to learn about other accounts that still provide a level of safety with more upside potential. Consider other alternatives to put the money to work.
The bulldog is the approach we recommend. Those who served in the Marine Corps, like Nolan, know this well. For those who didn’t serve in the Marines, the bulldog is our beloved animal that symbolized our ability to adapt, overcome and conquer. The approach is pretty simple for an investor, be prepared, calculate the risks, look for ways to win, divide and conquer. When we work with investors, we go over a T.E.A.M. approach. That means we divide opportunities and threats into four categories; taxes, estate planning, asset protection strategies and money management. This can make what seems like an impossible task much easier to conquer. If you need help getting started, go online to www.retirementguysradio.com and request our Investors Repair Kit.
Neither the information presented nor any opinions expressed in this article constitute a solicitation for the purchase or sale of any security.
Got a question for The Retirement Guys? Send your e-mails to email@example.com or you can reach them by calling (419) 842-0550. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. Their office is located at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.
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