JUST PLAIN TALK: Keep your investments safe
Lewis Grizzard wrote with color and enthusiasm; sometimes, he used a dash of poetic license, sometimes a bit more. It troubled me to discover, but he never slipped a risque double-entendre headline by a less than attentive night editor. Dawg fans remember the story, but I get it.
Finding fresh material is challenging. Grizzard once explained, “Writing a daily newspaper column is like being married to a nymphomaniac. The first two weeks are fun.” (New York Times Magazine, March 8, 1990).
If a pandemic has a silver lining, the coronavirus gives financial scribes more variety of topics. Maybe people pay more attention.
Noted investor Warren Buffett famously wrote, “It’s only when the tide goes out that you learn who has been swimming naked.” Buffett lives in Omaha, and while he knows more than me, tides changing don’t affect what you see at the beach. Like Grizzard, he’s using poetic license to make a point. To wit, people ill-prepared for a downturn suffer more. If you should have made a change, it’s not too late.
For five years, I recommended a client take advantage of the 3.5% fixed rate in their deferred compensation plan. It’s never too late to do the right thing. I wish I, along with all my clients, could put a chunk of our nest egg in a AA rated investment with a sporty yield and immediate liquidity. It was a good idea five years ago, a better idea five months ago and still not a bad idea today.
Being worried and fearful is a normal human reaction to adverse stimuli. The virus can hurt you physically, and the market reaction can harm you financially; people get a double whammy. No one knows how the virus will affect the world’s economy. Wash your hands and take care of yourself. But with your finances, you have greater control. Your investment portfolio should be for your long-term objectives. As such, there will be volatility.
To paraphrase Buffett and mix a metaphor, everyone is a long-term investor when the tide comes in, but when it goes out, you discover the discipline long-term investing requires. Prepare emotionally for higher volatility. Computer programs driven by algorithms push prices up and down. When exacerbated by investors’ fears (and greed), wild price swings occur. In the short-term, market movements are dramatically affected by anxiety and computer trading, but in the long-term, prices reflect economic trends. Keeping your near-term spending goals in cash or safe investments is a preventative, like hand washing.
If you get the notion to sell, disregard online comments; they are more detrimental than computer trading. If someone promises you an annuity with downside protection, remember, there’s no free lunch. Yes, your principal is protected, but you pay for it by forfeiting future growth. If something sounds too good to be true, be careful; there are no magic bullets.
You can’t always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.