6 Ways Investors can Navigate Tough Times
By: Brian C. Beasley, CPWA
If you’ve been investing anytime during the past ten years, you’ve probably had more than your fill of challenges. The economy seems to have jumped from bubble to bubble, watching each one burst justwhen everyone seems to commit their money. The uncertainty has not faded, as mixed messages aboundthroughout the news media and economists. An old friend appreciated our recent 3
Quarter Outlook, butasked me, “What am I to do?”First, know your environment. If you don’t know what the economic weather is, you’re bound to makesome pretty big mistakes. Our recent outlook and economic commentaries have tried to illuminate someof the key elements of the current economy. If you haven’t had a chance to study these, please let usknow. We’d be happy to get them to you.Secondly, know thyself! Everyone is reacting differently to this environment. Here are the six behaviorswe’ve observed over the past decade. Before you make any changes to your investment plan, you shouldbe aware of these six strategies. As you read these six types of investors, try to figure out which ones bestdescribes you.
Six Types of Investor Reaction to Tough Times
The Ostrich: If you’re reading this, congratulations! You’re not this poor soul. This person has theirhead in the sand and isn’t paying attention. This is fine if you’re a high school student, but if youhave responsibilities, dreams, or any money invested, you simply shouldn’t ignore that “investingstuff.” The Ostrich may be experiencing tremendous stress in their financial life, but they choose toignore the problem. Instead, they might try to escape by immersing themselves in sports, realitytelevision, or pleasure. This person avoids any discussion of current events, claiming “I’m just notinto that.” All the while, they may still complain about their financial situation to anyone who willlisten.2.
The Knee-Jerker: When things get confusing, and uncertain, we all crave security and predictability.It’s perfectly understandable, especially when consumer confidence is low & stock markets fall. Forthis investor, predictability is the single most important thing to them. They need each monthlystatement to show a bigger balance than the last. The stress & worry gets the best of them, and theysimply give up. In some cases, this need becomes so great that these people will sacrifice theirfinancial future for the sake of this type of predictable outcome. For example, a couple whosefinancial plans required a return of “inflation plus 3%” can potentially torpedo their entire future bymoving everything to CD’s that pay 2%.
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