Planning, Emotions, and Drastic Actions
By John Park
Have you ever spent time diagnosing yourself on the internet? There are so many self-help medical resources out there. It is almost a curse. I occasionally find these resources helpful, but sometimes I need to avoid them. I’m normally not a hypochondriac, however, after 30 minutes on WebMD, I feel like I have every illness known to man. I start to wonder if I contracted some rare illness that’s only been diagnosed five times in history. Ok, maybe it’s not that extreme, but you get the point.
If I feel like my health and wellness are not optimal, I really need to see my trusted doctor. After all, a person’s health can be a very emotional subject and our conclusions can often be wrong. Thankfully we are limited in the damage we can do to ourselves with medical self- diagnosis. Could you imagine what would happen if you could call the pharmacy and prescribe yourself dangerous, life altering drugs, because you read about a potential problem online?Perhaps it’s best to involve a professional in such an important and emotionally charged subject.
Naturally, there are comparisons between this example and investment management. It makes sense that we get scared and upset about investments and our money in general. Money is a means to an end. It provides financial stability, pays for our living costs, medical costs, etc. Money is an important factor to anyone planning for or living in retirement. At the same time, it’s an emotionally charged factor.
The world of finance is precarious. You can quickly sign up for a long term and illiquid investment or take action that causes massive taxation and penalty with just a few mouse clicks. You can find a less than qualified “professional” to assist you in the damaging actions.
Let’s examine what leads to financial self-diagnosis and drastic action: If a majority of what we hear and read says our money is in danger, it’s only natural to be worried. Many clients are already disciplined and wise enough to not fall for the fear-mongering tactics of the news media, insurance sales people, and commission-based investment advisors. The media and sales people often rely on such tactics to have any hope of getting you to subscribe to their advice. If they can’t convince you that you are in trouble or in need of what they know, why else would you pay them any attention?
A simple example is the kind of cliché news tease we frequently hear: “Tune in at nine to find out what unsuspecting everyday household item can harm you and your family!” One might ask themselves, do I want anything bad to happen? Obviously not. Well, guess I better tune in at nine.
Another common example are the swarms of advisors who pay for radio and online advertising. They might say things like
“learn how to protect your investments from devastating crashes” or “find out how to get wealthy from this secret.” One might ask themselves, do I want to protect my money? Yes. Do I want to be wealthy?
Yes. Well then, I better subscribe to whatever this person is saying and selling. It is usually easy to recognize the absurdity of these tactics; although, sometimes we can’t help it. We are bombarded with terrible advice and cheap sales tactics in all areas of our lives. Over the decades, advertisers have learned to become sneaky and use subtle tactics. They often rely on fear and other emotions to get you to buy. They will make bold predictions and pretend to know the future. Occasionally these charlatans appear to be right. The markets have never opened on January 2nd and gone straight positive until December 31st. You hear the naysayers declare a market pull back or crash is imminent (their definition of “crash” is very broad).
Because we tend to have intra-year pullback and cyclical action in the markets, the naysayers are, on a rare occasion, right. They may be wrong most of the year, but eventually they seem right. Remember the saying “even a broken clock is right twice a day?” Well these doomsday fools are indeed broken clocks.
Remember to always remain level headed and logical when it comes to your finances and investments. Don’t let the onslaught of marketing and schemers deter you. It’s ironic that money in general needs to be handled logically and wisely, yet it is one of the most emotional subjects we deal with. Just as with medicine, it’s wise to involve a third party with your crucial fiscal decisions.
Please remember, although we don’t get emotional about investments and finances, it doesn’t mean we don’t care or are not vested in your well-being. It is the opposite. It’s because we care so much about your financial well-being and security that we focus on being diligent and prudent with your investments. One of the ways we demonstrate our focus and dedication to our clients is how we react to volatile markets. We know that wise planning is done ahead of time. We help you develop a diversified and disciplined approach to investing up front, before anything else. It is
this blueprint and groundwork that helps us.
Once we have developed and agreed to a disciplined plan, the last thing we want to do is abandon it when times get rough or appear to be rough. I often equate smart financial planning to food storage. You don’t wait until a famine happens to develop a contingency plan of food storage. By then it is too late. You’re in trouble. At the same time, if you have built a long-term and sustainable food storage, you don’t set it on fire because a food shortage started.
When trouble starts, you need to hold onto your existing plan. Don’t abandon it. Realize that you’re prepared and need to avoid drastic actions. Stay the course. Stick with the plan. It will work!