Been There Done That

Investing in equities (stocks, 401k’s, mutual funds) over the past decade has left many questioning whether it was worth the ride. Much like riding a roller coaster, you climb higher and higher and think “wow, getting up there”, feeling excited, yet also anticipating the drop to come and wondering how scary it might be. As if this weren’t enough you also have the turns and curves that push and pull your body in three directions all at the same time, and then finally the ultimate plunge, which places your stomach up into your throat. While these feelings may be thrilling and fun when riding a roller coaster, they certainly are not when it comes to your investment portfolio, retirement plans and/or life savings. Whether you have invested for decades or just months, you know what I am talking about.
You should also know that what ultimately happens in the investment arena is dependent upon underlying market and company fundamentals as well and sometimes more importantly “People’s Emotions”. When an investment goes up, we feel euphoric; when it goes down, we feel defeated. When it does nothing or is undecided, the uncertainty is almost as bad as the market going down. As I write this column, the negative financial news of the day is focused around PIIGS (Portugal, Ireland, Italy, Greece and Spain) and who might default and whether or not one or more will withdraw from the EURO as their currency, which in turn impacts you as an investor. I believe that most, if not all, investors would be best served to try and control the one thing they can when it comes to investing emotion. You must try and remove emotion from the investment decision process and make sure that you remain focused on your long-term goals and strategies.

Psychologically, where might you be on the investment roller coaster, and have you ever experienced any of these feelings? UPBEAT – “I think the stock market offers me the best long-term potential for growth” CONFIDENT – “I’ve already made money. This is great.” THRILLED – “Investing is easy. I think I’ll help my brother with his 401(k) choices” EUPHORIC – “I should quit my job and do this full-time! Look at the money I’m making” STARTLED – “I think I lost money this week” NERVOUS – “What happened?? What is going on” SCARED – “I didn’t know it could drop so much” DESPERATE – “There’s no point in selling now, I’ve lost too much” PANIC-STRICKEN – “I put all of our retirement money in aggressive investments.” DEFEATED – “There goes our dreams of an early retirement.” RESIGNED – “I’ll have to start saving more and start cutting out some expenses” HOPEFUL – “Things seem like they’re turning around.” ENCOURAGED – “I’m glad I held on and stayed invested.” UPBEAT – “Over time, the stock market still offers me the best potential to accumulate wealth.” There are a variety of emotions associated with investing, and having worked with investors for 30 years, I believe I’ve seen them all. That said, no matter where you might be on the investment roller coaster, here are a few simple rules to help smooth the ride.
• Be sure you fully comprehend and understand the specific investments held within your portfolio. • Always have a clear goal in mind and set appropriate time horizons. Focus on the long term. • Diversify your investment portfolio. Income investments help to cushion volatility. • Schedule regular portfolio reviews with your investment advisor to keep your portfolio on target. • Keep your expectations realistic. Ed Maass is a Certified Financial Planner, Chartered Financial Consultant, and Chartered Life Underwriter. Located in Delray Beach at 74 NE 4th Ave. Suite #3, you can contact him directly at 561-272-0663 or by email at