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Smart Women Smart Money – Stock Market
Arcadia Weekly Apr 10, 2013
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Hi Emmy. I really enjoy reading your new column. Now that the stock market seems to be booming again, is there any particular bandwagon you can advise me to jump on?
Well, that all depends on how bumpy of a ride you can handle. Does your rumble seat have a lot of cushion left?
All kidding aside, I do believe there may be a need to shift gears when experiencing a bullish or bear market, but I rarely advise my clients to hitch a ride on the next new vehicle. I’m sorry to confirm that there is no such thing as a free ride. Stability almost always trumps unpredictability, especially when you’re saving for retirement.
A well-structured investing plan is specifically designed to absorb the shocks from the ups and downs of the road ahead. Professional financial planners like myself spend a lot of time designing a rational investment strategy to increase your wealth. The excitement of potentially capitalizing on a heady market can often lead to ill-fated decision making.
The same is true during significant downturns. Ditching a well thought out, long-term investment plan because of an economic free-fall can be just as foolhardy. The rule of thumb remains the same: Buy low and sell high. Many who bailed out during the recent market slump may have made a significant mistake. As a whole, the stock market as recouped its losses from the past few years and has even made some gains.
Unless you’re prepared to take a significant gamble, which I’m not necessarily against, plot your course with your mind not your gut. Exciting markets cause us to do foolish things. Avoiding emotional decision making is the cornerstone of fruitful investing. In my opinion, the most significant risk investors face is getting scared out of following their predetermined roadmap. Divesting out of fear at the wrong time can cause you to miss out on future gains. The second biggest mistake is succumbing to the temptation of an apparently easy buck. If this is what you’re hoping to find, it’s most likely illusory. Please don’t take risks that you do not understand in pursuit of potential higher yields.
My advice may be a bit boring, but there’s nothing sexy about regretting a sudden urge (unless it involves chocolate). My business focuses on my client’s retirement needs. Confidence is key. Unless you’re a younger investor, who won’t require the income for a decade or more, or someone who has enough financial padding to bounce off other bumper cars, we must all strike a balance between the slow and the fast lanes.
If your heart is saying “I need to get in on this,” hit the brakes for a second. Remind yourself if something seems too good to be true, then it probably is. Unfortunately, my conclusion may not be the one you were hoping for: the key to successful investing is having a diversified, well-designed plan and sticking to it over the long haul.
The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual & do not constitute and endorsement by NPC. Securities and Advisory Services Offered Through National Planning Corp. (NPC) member FINRA, SPIC, a Registered Investment Adviser. EH Financial Group, Inc. and NPC are separate entities and unrelated companies.
Emmy Hernandez
Certified Financial Planner® Practitioner Attorney at Law
Please submit questions to emmy.hernandez@natplan.com or call 626-943-8833.
By Emmy Hernandez Certified Financial Planner® Practitioner Attorney at Law
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