By Anthony Larsen, BAS, CFP®
Investment success can be reduced to four simple words: buy low, sell high; just as diet success can be boiled down to: eat less, move more. So why aren’t we all wealthy and in stellar health? Because fear, excitement and everything else that makes us human, can short circuit our thinking.
We sometimes allow a rough day to excuse a break from our health goals, just as we sometimes grant world events the power to shake our investment confidence. But it’s never wise to make decisions, with long term consequences, while relying on short term emotions.
When it comes to investing, the most powerful emotion driving bad decisions is fear — fear of making a mistake, of looking foolish and of losing money. When we understand the factors that trigger our fears, we are better able to guard against them.
We’ve identified three things you can do today, to dispel your fears and help generate the long-term investing results that will shape the life you live now and in retirement.
Ignore the Media
The media’s objective is to have your eyes on their news. Sunny, optimistic messages won’t keep viewers in front of the screen. When it comes to financial news, it’s a threat to our investments that makes us pay attention. Financial reporting is almost always served with a generous helping of worst case scenario speculation.
Because they are feeding us extreme doom and gloom outcomes, they are often wrong. Things often don’t turn out to be as bad as predicted. Whatever your feelings on the new American President, Donald Trump’s election didn’t affect the stock market as significantly as expected. Dow futures fell more than 800 points on election night, but overall, the stock market has been performing well in the weeks leading to his inauguration, and through the first few days of his presidency. The S&P index, (a benchmark index of 500 stocks considered a leading indicator of U.S. equities) has registered gains of more than 6% since election night.
There is no doubt that political and economic events (and possibly presidential tweets) can impact an investment portfolio for a period of days, even weeks, which certainly stirs-up investment jitters. But the successful investor takes a deep breath and maintains a long range view.
Although we advocate financial literacy, we suggest you don’t follow the financial news media too closely. If something truly significant happens you’ll hear about it. Following the day-to-day speculations, which can even be contradictory, is like riding a roller coaster that never stops.
Better than the 24-hour news-cycle, is information pertinent to you, which is why we suggest that you understand your investment choices.
Understand Your Investment Choices
It’s not uncommon for Canadian investors to allow an advisor to take the reins on how and where their money is invested. It seems to make sense to trust the experts. Unfortunately many advisors provide cookie cutter assessments of their client’s needs, and don’t take the time to understand each client’s unique circumstances and goals.
It’s important that you ask your advisor questions.
- Are my investments well-suited to who I am?
- How can I protect what I have while still building wealth?
- Will I have enough to retire in the way in which I want to live?
It’s unanswered questions that leave many Canadians with low, (or high), anxiety about their financial future. Couple that with the fear-driven financial media speculations; and it’s a wonder the whole country isn’t awake at night with worry.
But investing can be complicated.
- Is real estate a better investment than the stock market?
- RSP, TFSA, ETF, Mutual Funds –how to you decide which is best for you?
- How much is too much when it comes to investment fees?
And while it’s not feasible for the average person to become an investment expert, it is incumbent upon Canadians to have some understanding of investments. Not only will it make them better investors, knowledge also dispels fear. It’s far easier to have confidence in something you understand, (and stay-the-course in restless times), than to blindly take the word of someone who makes a commission off your decisions.
There are many ways to increase you investing knowledge; you can dip your toe into something simple like a blog, or podcast, or invest in something more comprehensive like our Investment Coaching Program. You will also find many useful books on our recommended reading list.
The third way to increase your investing confidence and dispel the fears that foster rash decisions; is having an ally with your best interests at the forefront of all advice.
Work with someone you trust
Even equipped with a better understanding of the rationale behind your investments; unless you discover you have a passion for the subject, you are still going to need guidance. That guidance, to be truly effective, needs to come from someone who does have 
a thorough understanding of investing, (and more) and is free from bias. A financial advisor, paid through product sales commissions, can’t help but have a stake in where you put your investment dollars.
Fee-for-service advisors, such as Money Coaches, are compensated for the time and effort they spend committed to your success; no hidden agenda or conflicts of interest. They take the time to understand your personal, family and even professional goals.
Money Coaches build a relationship of trust with their clients. They can facilitate tough financial conversations between you and your partner; help plan for your children’s education needs; guide you in estate planning; even develop a flexible spending and savings plan to support short-term goals like a vacation and long term goals like retirement.
When it comes to investing, a trusted and knowledgeable ally can guide you towards investments that make sense for your life and your goals. A Money Coach will make sure you understand the “why” behind the recommendations, so that when the next ill-wind blows through the financial markets, you can make rational, unemotional decisions. And you won’t have to make those decisions alone.
