Don’t let fear drive investment decisions

SUBMITTED BY PATRICK ZAMKIN

In the past year, we’ve seen some big swings in the financial markets. This volatility may make you feel as if you have little control over your investment success. But the truth is, you do have more control than you might think — as long as you don’t let fear guide your decisions.

Investment-related fear can manifest itself in a few different ways:

• Fear of loss – Some investors may emphasize avoiding losses more than achieving gains. Consequently, they might build portfolios they consider very low in risk, possibly containing a high percentage of certificates of deposit (CDs) and U.S. Treasury securities. Yet, a highly conservative approach carries its own risk — the risk of not achieving enough growth to stay ahead of inflation, much less meet long-term goals such as a comfortable retirement. To reach these goals, you’ll want to construct a diversified portfolio containing different types of assets and investments — each of which may perform differently at different times. Your objective shouldn’t be to avoid all risk — which is impossible — but to create an investment strategy that accommodates your personal risk tolerance and time horizon.

• Fear of missing out – You’re probably familiar with the term “herd mentality” — the idea that people will follow the lead of others for fear of missing out on something. This behavior is responsible for fads or the sudden emergence of “hot” products, and it’s also relevant to investing. In fact, herd mentality may contribute to sharp jumps in the financial markets as investors drive up prices by buying stocks to avoid being left behind. And the same may be true in reverse — when the market starts dropping, skittish investors may accelerate the decline by selling stocks so they, too, can get out before it’s too late. Buying or selling investments should be considered as needed to help advance your long-term financial strategy — not in response to what others are doing.

• Fear of the unknown – Some investors fall victim to “familiarity bias” — the tendency to invest only in what they know, such as local or domestic companies. But this behavior can lead to under-diversified portfolios. If your portfolio is dominated by just a few investments, and these investments are fairly similar to each other, you could experience some losses when the inevitable market downturn occurs. To help reduce the impact of market volatility, it’s a good idea to spread your investment dollars across large and small companies in a range of industries and geographical regions. And that’s just on the equities side — it’s also wise to consider further diversifying your portfolio by owning bonds and government securities. (Keep in mind, though, that diversification can’t guarantee profits or protect against all losses.)

• Fear of admitting failure – Some individuals don’t like to admit when they’ve been wrong about something, and they may continue the same failed activities, hoping for eventual success. This behavior can be costly in the investment arena. Sometimes, a particular investment, or even an investment strategy, just doesn’t work out, but an investor is determined to stick with it — even if it ultimately means considerable financial loss. Don’t let his happen to you — if it becomes apparent you need to change your investment approach, move on to something better.

Fear can hold us back in many walks of life — but don’t let it keep you from making appropriate investment moves.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor, Patrick Zamkin, located at 18735 Dixie Hwy, Homewood, IL 60430. Contact us at (708) 798-9066. Edward Jones. Member SIPC.

Choosing Goals

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What are goals? Goals are defined by Dictionary.com as the result or achievement toward which effort is directed; aim; or end. The purpose of having a goal is to guide oneself to identify the WHO, WHAT, WHERE, WHY, WHEN, WHICH, and HOW one wishes to become or to accomplish in life. By understanding and identifying these points, one can set a plan with specific steps to reach one’s goals and desires. Goals can help you plan the necessary steps to succeed with a sense of direction to lead your life. If you don’t have a plan or map, you won’t reach that treasured goal. “Commit to the Lord whatever you do, and he will establish your plans” Proverbs 16:3 NIV.

Goals set the target for all your plans and actions. It is important to keep in mind that while you can strive for any ambition, the chances of success are higher if you put it down in writing, frequently review and revise it if necessary, and take appropriate action towards its fulfillment. Goal setting is a positive action with unlimited possibilities.

When you choose and establish goals, listen to your heart’s desires, passions, and interests; what is important, necessary, and drives you. Additionally, you should set goals in all aspects of your life such as physical, spiritual, financial, emotional, business/career, family, and personal. Working on more than one goal at a time is not as hard as it sounds. You don’t need to begin with large goals, small and incremental goals are just as effective.

The most achievable goals are the small “baby step” goals. Little steps lead to bigger steps. Everyone wants to be successful, however, attempting to accomplish huge goals overnight can lead to feelings of discouragement.

Establishing S.M.A.R.T. goals, an acronym for Specific Measurable Attainable Realistic Time-bound is a good strategy for increasing the likelihood of achieving success. Goals need to be set with as many details as possible, including the 6 W and how. Be as specific and exact as you can to what the purpose of the goal is. To track your progress toward the finish line, it must be measurable to see how close you are to achieving your goal. A goal must be attainable and not impossible or completely out of reach. It must be realistic. Is it in the realm of your capabilities?

Lastly, it must be time-bound. State a reasonable and specific amount of time for you to reach the goal. Enough to motivate you but not stress you. You need a way of accountability with concrete criteria.

Finally, to increase the chance of reaching your goals, you must be willing to take action towards them by taking a “baby step” and truly believe in their attainment. I encourage you to create two small, SMART goals in two areas of your life to be achieved in two weeks. Share with me your success and remember that it is important to have faith in your goal and to start taking the steps to reach it. Y? Why Not! ywhynotshow@gmail.com