Wow, the markets have been on an epic roll. Truly epic. So lately, I’ve been asking a simple question of clients and those who attend my retirement classes.
Is this time different?
Let’s go back to 2000 and the dot-com bubble for a moment. Technology stocks were on a roll. They say if the taxi driver gives you a stock tip, it’s time to get out. (Of the market, not the taxi…) In those days, everyone had investing advice. People used to talk about technology companies and the Nasdaq as if it were a one-way street. UP. Experts, prognosticators and average Joes alike used to say “this time was different!”
Do you remember?
I mean, come on, those companies don’t have debt. They’re structured differently. They don’t have the same rules. They don’t behave like the Johnson & Johnson and the IBM’s of the world. This is different.
But it wasn’t different; nor was it different in 2007 when people were buying homes with no assets, no credit and, curiously, no money down.
Over the years, I have watched investors repeat the same mistakes over and over again. From exuberance to fear, buying high to selling low, chasing returns, and always believing this time is different, only to once again be reminded it’s not.
The words “this time is different” are among the costliest words in the history of investing. One of the key differences between successful long-term investors and those who are not, is that successful people learn from their own mistakes and commit to never making the same mistakes twice.
Many common investing mistakes can be attributed to emotional decision-making. Whenever you make financial or investment decisions, you will confront the challenges of overcoming fear and greed. Fear can cause you to run for the exits when markets decline or your portfolio takes losses. That’s not the problem right now. It’s the opposite emotion: Greed
Greed can encourage you to hang on too long in pursuit of an even bigger score. Greed can prevent you from taking chips of the table when you probably should. However, by recognizing your emotional triggers and engaging your rational mind, you can overcome your impulses and cultivate discipline.
Working with a financial professional can help avoid emotional decision-making and many other pitfalls commonly encountered by amateur investors. It’s our job to remain focused on the long-term strategy and act as a voice of reason when emotions run high.
As Lance Roberts, economist at Real Investment Advice reminds advisors. “Our job, is to analyze, understand, measure, and prepare for what will reduce the value of our invested capital.”
I say it a bit differently: Skilled financial advisors protect you from, well... you.
In today’s world of high-tech investing, major financial decisions are only a click away and investors pay a high price for short-term thinking. Professional financial representatives can be invaluable for their ability to answer questions, provide reassurance, and keep financial strategies on track despite volatile conditions.
So, here’s my free advice of the day.
AGGRESSIVELY MONITOR YOUR INVESTMENTS, OR PAY SOMEONE SKILLED TO DO IT
When markets are rising and amateur investors are doing very well, it’s easy to forget that protecting your assets during declining markets requires skill, discipline and constant attention. Investors need to expect and be prepared to react to fast-moving markets. No market rally is permanent and no decline lasts forever, meaning that there are no investments that you can buy and forget about. The pace of change of today’s markets is too great for investors to be complacent.
Investing with long-term assets is not child’s play since most investors can ill-afford to lose their nest egg. Today’s markets are no place for dabblers without the time, patience, discipline, and diligence needed to do a proper job. If you aren’t completely sure that you have what it takes to manage your investments well, it may be time to find a professional financial representative with the skills and experience to do it for you.
Is this time different? (I don’t think so…)
That’s just the way it works!
Required disclosures: Investment advisory services offered through Brookstone Capital Management, LLC (BCM), a registered investment advisor. BCM and (Strataxa Retirement Advisors, LLC) are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents.
Information provided is not intended as tax or legal advice, and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional