There are wealthy people all over the country paying their financial advisors thousands of dollars a year for financial advice. When it comes to investing, this is what they are saying.
I am a finance writer. No, I’m not talking about this blog. I mean people actually pay me to write about money. Isn’t that awesome? I write blog posts for real financial advisors and their rich clients. You may think that sounds boring, but I actually think it’s a lot of fun.
Lately, I’ve been writing a lot of posts about what to do during a market downturn. You see, the stock market is at record highs and has been going up for a very long time (second longest streak in US history). Because of this, a lot of people are holding their breath, just waiting for it to drop at any second.
In addition to writing posts about what to do when things are bad (for the advisors looking into the future), I have been writing posts about what to do when things are going great (for those who are focused on the present).
What The Professionals Are Saying
You know what the funny thing is? Whether they’re talking about a crashing market or a soaring one, the advice they give is all the same. That’s right. The same principles apply no matter what the stock market is doing.
And these people giving this advice aren’t stay-at-home mom bloggers up in the middle of the night pontificating and hoping that someone will actually listen to them (since their kids won’t!). These are highly trained and experienced professionals who charge their clients lots and lots of money to help them.
For many of them, you need at least $500,000 or twice that just to work with them. A lot of their clients pay $5,000 to $20,000 and above a year for their advice. So these guys (and ladies) know what they’re talking about.
The crazy thing is, that even with such exorbitant fees that they pay, most clients end up much better off financially because of this advice. I’m talking differences of $100,000 or $1 million. Yes, they get paid a lot and it’s still a great deal for their clients.
What is this advice that is so valuable that people are willing to pay thousands of dollars for it? Follow this link and enter your credit card information, and I will send it to you. No, just kidding. You get it for free. Here you go:
Stick With Your Plan
Usually, you’ll see something like “Rebalance Your Portfolio.” That just means that if your plan was to have 50% in Investment #1 and 50% in Investment #2, keep it that way. If Investment #1 grows really fast and ends up being worth 65%, sell some off and buy Investment #2 to keep the 50/50 split. Stick with your plan.
Like most plans in life, investment plans can get a little off track as time goes by. That is to be expected and nothing to worry about. Just take a little bit of time every year to realign things. You can go around telling people you rebalanced your portfolio and sound sophisticated.
Expect Market Cycles
Like a three-year-old’s emotions, markets go up and down. Though not nearly as quickly, thank God. Just take it as a fact and don’t let anyone (yourself included) try to convince you otherwise.
You see, what happens is that when things have been going up for a long time, people forget that they will eventually go down. Then they are shocked when things do.
No matter how long the summer is (fingers crossed), I know that eventually the leaves will fall off of the trees and winter will come. There’s no need to be surprised. I also know that summer will come again next year. Just like life and nature, financial markets move in cycles. Solomon wrote about it, The Byrds sang about it, it’s a fact of life. Don’t let the ups and downs of the markets startle you.
Don’t Freak Out
My previous point is what leads into this one. When people forget that market downturns are inevitable, they completely freak out when they happen. It’s the end of the world, the sky is falling.
The greatest value that a professional financial advisor actually provides is in keeping their clients from doing stupid things while they are freaking out about the markets. Computers can rebalance portfolios, but only a patient human being can talk someone out of cashing out their investments to buy gold when they’ve been watching too much nightly news.
You can save yourself a few thousand by getting a calm and rational person to be your accountability partner. Or you can just avoid the hassle altogether and stay calm, knowing that markets move in cycles and God is always in control.
When it comes to investments, your biggest enemy is not a bear market (when things are going bad), but your own emotions. Keep them in check and you will find success. That applies to a lot of other areas of life as well, from parenting to traffic jams.
Well, there you have it. It all boils down to those three things. Stick with your plan, expect ups and downs, and don’t let your emotions get the best of you. (That’s actually really good marriage advice, too, isn’t it?) Now here’s the hard part: Go do it.
I know, I know, you’re welcome. Glad to help. I’ll be looking for your $5,000 check in the mail.