Wouldn’t it be nice if your investments in the stock market came with a money back guarantee? Or what if the media never exaggerated the facts? How much better would we all sleep at night if we could predict the future of our investments, stocked with our pension funds or our kid’s college money? It sounds like wishful thinking in a society where we want everything to end like our favorite movie, but the reality is we have to be prepared to make the best decisions we can with the situations we face with the next morning’s news.
Not to paint a dim picture but things have been rocky out there for the individual investors who are trying to stay on track. Here are few things to keep in mind.
Don’t let your emotions get the best of you. Probably the first lesson a rookie investor learns is the same one the experts still have to remember. Gaining control of your emotions will ensure you make the best decisions and stick to them. If not, you end up buying high when you’re excited and selling low when you’re panicked. You’re sure you made the right decision until you start thinking about how much you have invested. Suddenly fear overtakes you and in a moment you can make a decision you might regret for the rest of your life. Try to stick to the basics of buying and selling and check your emotions at the door.
Keep your eyes on what the experts are doing. As it turns out, near hysterical reporters might not be the best thing to watch. So who do you listen to and what should you look for? “Do your own research but think about this,” said Daniel McMains of Edward Jones Investment, Shawnee. “You have all these pension funds out there and they’ve got money in the stock market. If you watch what they do, you might want to ask yourself, ‘they’re a lot more educated than I am so what are they doing that I can mimic?’ It’s safe to say they are not selling out of good investments at historically low levels. They’ve got research and teams of people who give them access to things that everyday people like you and I don’t have.” Follow solid companies with a proven record and you might just outsmart the news anchor.
Diversify, diversify, diversify… It’s not that you can’t take a risk now and then but it’s best to avoid putting all your eggs in one basket. “If you have all of your money in one company, you’re not guaranteed they won’t go bankrupt,” said McMains. “The way I see it, if you have your money diversified well in a good portfolio the likelihood of losing your money is the same likelihood that about 1,000 of the best companies in the world are all going to go bankrupt on the same day. If you want to take a risk on an individual company, don’t put so much money there that you would be financially devastated if the company went bankrupt. Diversification is one of the most important pieces to the puzzle when it comes to managing your serious savings.” So spend only what you can afford to lose on the hottest thing to hit Wall Street and keep your big money safe.
Invest with the global market in mind. Although investing in foreign markets is nothing new, more people invest globally than ever before. While some people see foreign markets as unreliable, most investors include international investment in their portfolios. “People who had international portfolios between 200-2007 probably did better than those who didn’t. I think a healthy portfolio should show about 20-30% international exposure. I am not one to say we shouldn’t support our own markets but it’s a very prudent thing to do with your money,” said McMains.
As long as there are buyers and sellers, some things will never change. Keeping your cool, investing wisely, and seeing the bigger picture will help everyone steady their course to a more prosperous future.





