With the current news, investing can be a scary business. It’s great when you make money, but terrible when you lose. Even paper losses can hurt.
While investing can be nerve racking, it doesn’t need to be. If your investments are made according to your financial plan, and you maintain your desired asset allocation, you should be fine in the long term.
Myths about the wealthy
One of the greatest myths about the wealthy is that all of them live “celebrity lifestyles,” complete with fancy limousines. But if you were to read the biographies of the rich and wasteful, you would discover how quickly wealth can be squandered on high living. Indeed, those who are truly rich and have held on to their money are the ones who have continued to lead ordinary lives as far as possible, driving regular cars, and living a modest lifestyle.
In addition to living modestly, many successful investors keep a portion of their funds in liquid accounts. This way, they have some money readily available for emergencies and living expenses. They understand the absurdity of paying to borrow money, if you have money but it is inaccessible, tied up in an illiquid investment. An emergency fund can take the form of a bank savings account, or even cash stashed away in a drawer.
Should you let fear steer you?
Don’t let fear rule your life. The most successful investors don’t sell the minute they see a drop in the market. Sometimes it is better to hold on and to wait until things get better. If you still believe in the fundamentals of the company and time is on your side, consider sticking with your original financial plan and asset allocation.
Weather the storm and don’t panic – and maybe you too will one day be a successful investor. It’s fine to be apprehensive of the market’s volatility, but don’t let fear steer you away from following your financial plan. Call your financial professional (02-624-2788) to make sure your financial plan is still relevant for you.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published September 1, 2014. Updated May 2020