Courtesy of Pam Martens.
Based on worries expressed by friends and comments I see under financial articles, there is great angst among Americans on a broad range of financial issues. I’ve frequently read comments indicating people are not opening their financial statements, just filing them away unopened, to avoid the stress of looking at their roller-coaster account balance. Frankly, that’s a recipe for disaster. Errors can, and do, occur and checking that statement carefully is a hallmark of prudent investing.
The best way to deal with angst is not to pull the covers over one’s head but to be proactive. Make a decisive plan and stay on course. If your investments are causing you sleepless nights, at the top of your proactive plan should be: speak to my financial advisor about my unease.
Under law, investments are supposed to be “suitable” for the client. That implies things like: don’t buy a risky growth stock for a 90 year old; don’t invest in non-dividend paying stocks for a couple who have stated their major need is income; don’t buy start-up companies if the client tells you his most important objective is preservation of principal.
But all too often, financial advisors fail what I think should be a core mission of personal money management: build the client a prudent, effective financial portfolio that also allows the client to sleep at night. A portfolio that is creating stress, upset stomachs, and insomnia is a failure in my opinion, no matter what the rate of return. It may be legally “suitable,” but it fails on the basis of giving the client comfort and peace of mind. In other words, it is depriving the client of the very quality of life for which he saved that money his whole life.
In such a situation, all that might be required is sitting down with your financial advisor and saying all of the following: “I need to sell down to my sleep level; or I need to make some adjustments in the portfolio so there is less dramatic fluctuation of principal each month; or I need to put a portion of my money in FDIC insured principal products so I can stop worrying that I’m going to lose all my money. What do you recommend that we change?”
If the broker hears the above words and responds with something like: “it’s better to stay the course and focus on returns over the long term rather than month to month, this is what you say. “I don’t think you understand what I’m saying. I’m saying that ongoing peace of mind is as important to me as the ultimate rate of return on my portfolio. What do you recommend?”
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