By Douglas Goldstein, CFP®
Though I certainly wouldn’t recommend that most people check the stock market as often as I do, if you keep close tabs on the markets you certainly know the feeling of horror or happiness when you experience the volatility. Given the huge range of potential outcomes, one has to ask, “Is it really worth investing money in stocks?”
Everyone should have a different answer to this question. Unfortunately, too many people make the choice based on one or two core emotions: greed and fear. The greedy want more money, so they’ll put their money in the market. The worried folks, though, are too nervous, so they’ll avoid risk at all costs. But what are the costs of avoiding the market, and what are the possibilities if you invest?
To answer these questions, you need to accept the fact that no one has a crystal ball and no one can guarantee investment results. Once you realize that there is always uncertainty, you can begin to create a financial plan. The goal of the plan is to take a financial snapshot of where you are today and write down your goals for tomorrow; then, create an investment/savings strategy in order to try to make it work out.
One couple recently came to me for help to create their plan. They had an extremely small pension, a disabled son, and a high-risk portfolio. Almost 90% of their money was in stocks! Even though it had worked out well for them over the decades, at this stage in their lives, with their current financial commitments, it would be wise to limit their exposure to volatility. This isn’t to say they needed to liquidate all their equities; rather, we devised an asset allocation model that included a more bonds and bank deposits in order to complement the risky side of their account.
Don’t let your market concerns and/or your desire for a quick dollar influence your investment decisions. Rather, keep a cool head, make a plan – and stick to it.
Douglas Goldstein, CFP®, is the director of Profile Investment Services. He is a licensed financial professional both in the U.S. and Israel. He offers securities through Portfolio Resources Group, Inc. Member FINRA(formally NASD), SIPC, MSRB, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company. His book, Building Wealth in Israel: A Guide to International Investments and Financial Planning, (with a guest chapter on taxation by Leon Harris, International Tax Partner, Ernst & Young) is available in bookstores, on the web, or can be ordered at: www.profile-financial.com, (02) 624-2788 or (03) 524-0942. Building Wealth in Israel, ISBN 193268784X 308 pages.
