What’s Holding You Back From Financial Freedom?
Vol 5: Investing – Fear of Losing Money
Part 5 in Vicki Arndt’s series exploring the relationship between wealth and beliefs.
Does fear of losing money in the markets keep you from investing? Let’s change that!
I was fortunate to have a parent who invested. I didn’t know what investing really meant until I was in my twenties, but I remember my father looking at the stock market page in the newspaper. Yes, the price movements of most stocks traded on the New York Stock Exchange were printed daily in the newspaper. How things have changed! Back then, you could see the high and low of the day and the closing price. Today, we can see in real time what is happening for any investment traded on the exchanges. We receive more information than we can possibly use along with “talking heads” who share their opinions on what’s going to happen next, practically 24/7. Information overload is no joke: no wonder we walk around feeling like deer in the headlights.
My father had an adage about investing that is a guiding principle in my life: “You’re not an investor unless you lose sometimes.” Just think about that. Does any sports team win every game or a baseball player bat a thousand? Of course not. Yet somehow we feel when we make investment selections, we have to win every time.
Compounding the fear of an investment losing value, we compare ourselves to others – and always seem to fall short. Keep in mind that fishermen don’t ever talk about all the days they never catch anything. Instead they tell stories of the “big fish” they caught one time and not of all the little fish they threw back. Investing is the same. You’re going to win sometimes and lose sometimes, but just like fishing, if you do it enough, you will be ahead. Also just like fishing, investors will always tell you about their successes and gloss over the times they lost. You will eat more fish by fishing than if you stay in your house and watch TV. Likewise, you will make more money by investing than you ever would by putting your hard earned cash under your mattress – or worse, spending it as quickly as you make it.
Time is our greatest gift with regard to investing. The chance of losing money is absolutely correlated to how long you keep your money invested. However, it is also tied directly to the quality of the investments you have. My best advice is: always buy good stuff. What does it mean to buy good stuff? It means investing in companies that have a consistent track record, are producing a product or providing a service that people really want, and have strong financials. Good stuff will go up and down but when the dust settles, good stuff will still be worth something.
Long-term investing pays off, but that doesn’t mean you buy and hold forever. Think about Kodak. They bet wrong on the digital revolution and ultimately filed for Chapter 11 bankruptcy. If you’d held on to Kodak stock, you would have lost your entire investment. Sometimes good stuff becomes bad stuff, so a periodic review of your portfolio is essential to your success.
It’s important to remember that even when Kodak was falling apart, digital photography was booming. Someone is making money no matter what’s happening in the world. It’s time for you to be that “someone.”
Let’s discuss an investing strategy that fits where you are today and will lead you to where you want to be!
With you at every stage,
Founder & Senior Investment Advisor
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