My Stock Market Dream- How to Invest your Money Smarter in Stocks and Bonds.
By David Rae Certified Financial Planner™, Accredited Investment Fiduciary™
My stock market dream for you entails:
Sadly I know that when a crash happens (you can define a crash for yourself – some people freak at drop of 1%, 10%, 20% or when there is actually a full blown crisis like we had around 2008) more people will get cold feet and pull money from the market. Basically doing the opposite of what will help you build wealth: Buy High, Sell Low.
As a fiduciary financial planner my goal is to help people make smarter financial decision today and tomorrow, with that in mind to help them avoid the mistakes that leave many people just one missed paycheck away from financial ruin.
If day in and day out ignoring the apocalyptic headlines from the 24 News Cycle and making smart financial decisions were easy people may actually get better results, and feel happier with their investment choices. If that wasn’t bad enough we are not deluged with an onslaught of ‘fake news” via social media like Facebook and Twitter.
My favorite part of my job is when I’m helping clients make smarter financial decisions. I say smarter: this is time when we are choosing between a few options that all have benefits (and potential drawbacks) and are moving them towards their personal financial goals. Sadly, many people are fighting against making dumb financial decisions. If it was a multiple choice question all four answer you can choose from are bad for your finances. Not a great position to be in.
Zero Zilch None!
If I had to guess I’d say 95% of working adults in America need to be saving more (anything is more than ZERO), and 99.99% could benefit from smarter financial decisions along the way. You don’t have to be perfect to achieve financial independence but you do have to be proactive. Am I perfect financially – my husband would say “no he’s too cheap.” I prefer Money Maximizer (aka frugal) – I know I tend to hoard money, am getting better at taking my own advice to LIVE FOR TODAY, BUT SAVE FOR TOMORROW.
Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
― Warren Buffett– on Investment Risk
There are 4 Tenets or my Stock Market Dream that I want to share with you about building long term wealth.
Investment Risk Versus Volatility
Volatility is written into the DNA of the market. In fact, volatility is the market. The market may be up today, and down tomorrow or vice versa. As a financial planner I’m here to tell you that volatility is par for the course when investing. Temporary declines can only be turned into permanent losses if you make some of the big investor mistakes. Embrace volatility and be aware that it is by no means the same as investment risk.
Read More on this here: What’s the difference between Investment Risk and Market Volatility?
Investing versus Speculating
I liken speculating to gambling, you are hoping that some stock will go or down some amount over the short term. Day Traders are speculating. They often boast of amazing results when time are good, and more likely to be decimated when times are bad.
Investing is more like being the Casino. You diversify your risk across a portfolio and don’t need to win on every single hand all the time. Past performance is not indicative of results, but the stock market has trended up over the long term. Bottom line, don’t treat you investments or financial plan like a drunken weekend in Vegas, or you may end up with a rough Financial Hangover.
Many people often confuse these two. If you hear a hot stock tip at a party and rush out and buy it, you are most likely speculating. If you have a diversified portfolio and are putting away money on a regular basic you are more likely investing for some future goal.
Financial Planning Versus Investing
Investments are just a tool to help drive a financial plan. If you are working with a Fiduciary Financial Planner you may be presented with different investment choices made for different financial goals with different taxation and time frames.
We all want “great” returns, but that can be relative. I often use risk based portfolios for my clients, if you are saving for a house in a few years you would most likely want to take much less risk in that portfolio that you would in your accounts for retirement that may be decades away.
Bottom line, a financial plan is road map of often simple action steps to take to get you on track for your various financial goals. Including things like investing, tax planning, estate planning, protection planning and even sometime fun stuff like spending plans. We have to have money to travel right?
Face your Financial Fears:
Procrastination is one of the biggest issues keeping people from Financial Success. The day to day movements of the stock don’t really mean much for your odds of achieving financial success. If you aren’t invested at all they really mean nothing to you.
Not doing anything is a choice as well. Save ZERO dollars, and having ZERO dollar grow by ZERO percent will leave you with ZERO income from those investments regardless of how fabulous or successful you have been, or even how long you have delayed retiring.
Make 2017 the year you get your financial house in order, and more importantly keep it that way. Sit down with a fiduciary financial planner like David Rae to make sure you have a plan in place to stay on track for your various financial goals.
Live for Today, Plan for Tomorrow. You money matters.
DAVID RAE, CFP®, AIF® is a Los Angeles-based retirement planner. He has been helping friends of the LGBT community reach their financial goals for over a decade. He is a regular contributor to the Advocate Magazine Investopedia and Huffington Post as well as the author of the Financial Planner Los Angeles Blog. For more information visit his website www.davidraefp.com
Advisory Services provided by Trilogy Capital Inc, a Registered Investment Adviser. Separate advisory and securities services may be provided by National Planning Corporation (NPC), a SEC Registered Investment Adviser and broker-dealer. Member FINRA and SIPC. Trilogy Capital, Inc and Trilogy Financial are affiliated by common ownership and are separate and unrelated to NPC. Please consult with your representative to confirm which company’s behalf services are being provided.The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute and endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Investment in stocks will fluctuate with changes in the market conditions and indices are unmanaged measures of market conditions. It is not possible to invest directly into an index nor does past performance guarantee future results. Diversification help you spread risk throughout your portfolio, so investments that do poorly may be balanced by others that do relatively better. Neither diversification nor rebalancing can ensure a profit or protect against a loss. NPC does not provide tax or legal advice. “Stock Market Dream”