Top Ten Investment Excuses

It’s been a volatile start to 2015. If you believe the headlines screaming out at you from personal finance magazine, market volatility is something new and unexpected. However, when we look at market history, we see that volatility is not new at all. In fact, it is par for the course — and certainly no reason to stay on the sidelines.

With that in mind, I want to share the following list of investment excuses adapted from “The Top Ten Money Excuses” by Jim Parker, Vice President, DFA Australia Limited:

  1. “I just want to wait till the investment clouds clear.” It’s understandable to feel unnerved by volatile markets. But waiting for volatility to “clear” before investing often results in missing the return that can accompany the risk.
  2. “I just can’t take the investment risk anymore.” By focusing exclusively on the risk of losing money and paying a premium for safety, you might miss an upside and end up with insufficient funds for retirement.  You could also face other risks such as inflation risk, interest rate risk, etc.
  3. “I want to live today. Tomorrow can look after itself.” It’s not an either-or choice. You can live today AND mind your savings. You just need to adhere to your budget.
  4. “I don’t care about capital gain. I just need the income.” Making income your sole focus can lead you down a dangerous road and compel you to miss other opportunities.
  5. “I want to get some of those investment losses back.” It’s human nature to be emotionally attached to past bets, even losing ones. But, as the song says, you have to “know when to fold ’em.”
  6. “But this investment has been good to me.” Investors tend to hold on to winners too long. But without disciplined rebalancing, your portfolio can end up carrying much more risk than you bargained for.
  7. “But the newspaper investment section said . . .” Investing by the headlines is like dressing based on yesterday’s weather report. The news might be accurate, but the market usually has reacted already and moved on to worrying about something else.
  8. “My neighbor/uncle/ boss told me . . .” The world is full of investment experts, but generic advice rarely takes your circumstances into account.
  9. “I just want investment certainty.” While you cannot guard against every market risk, diversifying your investments across asset classes is the best way to manage risk.
  10. “I’m too busy to think about this.” Investors often try to control things they can’t change–like the market–and neglect areas where our actions can make a difference–like the costs of investments. Concentrate on what you can control and you will make better progress toward your goals.

Working with a trusted advisor can help you to stop making investment excuses and get on the road to reaching your financial goals. Make 2015 the year you seek expert guidance.

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