Dear Valued Financial Partners and Friends,
In the January-February 2015 issue of Money Moxie®, I addressed how Black Swan Events will—at some unpredictable point—affect your investments. The bottom line was, while Black Swan Events are unpredictable, you must control your reactions to these non-controllable events. Now, I would like to talk to you frankly about common ways we have seen some very smart people self-sabotage their own investments.
“I got out of the stock market during the drop, but I never got back in.” Or, alternatively, “I simply didn’t know when to get back in the market. No one rang a bell.”
“I repeatedly told my advisor to keep me in cash throughout the year because of market uncertainty.” (The reality: This individual missed out when the market went higher.)
“The stock market’s going to drop to such and such a point, then I’ll get back in.” (The reality: The stock market never fell to the point predicted and kept going up.)
Defensive reasoning or self-justification are other names for committing financial self-sabotage. Often people, some very smart people, are their own worst financial enemies because of egos, i.e. trying to be smarter than the market.
We have had prospective clients bring their investment statements to us to compare and what is surprising to these people is how staying invested trumps their own trading decisions. (Of course, there are no guarantees or promises of past performance being repeated.)
When worried about Black Swan Events, don’t let your emotions get in the way of making money. Don’t let fear ruin your retirement. Instead, talk to one of our wealth advisors. We have the time, financial talent, and financial training to help you prepare for and navigate through difficult times.
Bullish Best Wishes,
Roger M. Smedley, CFP®