Managing Your Finances & Emotions

Managing your finances, and/or investments, is a key component to any financial plan. However, managing our EMOTIONS around money is the far larger task!

The media's constant haranging about what the markets did (or is doing) today, plays a HUGE part in investors feeling that they must ACT on the media's 'news'.  These precipitous actions derail financial plans, so why do investors fall prey?  The media is expert in their mission and too few investors HAVE their own plan in place to combat these addictive, high pressure admonitions to 'do something now'.

We're here to help!  We'll distill what's important to know about sound investing, allowing you to 'escape' the 24 x 7 'financial noise' of the radio, TV, internet or any other 'breaking news' venue. 

I certainly understand, and fully appreciate, investors' penchant for wanting to know more about investing. My Investing Smart; Investing to Win speeches drew overwhelming responses of hunger for knowledge such that I sifted through myriad financial terms, and culled out which ones I feel are relevant, in my Ms. Morrison's Dictionary of Useful Financial Investment Terms, because so many of my new clients didn't understand the financial terms.  And, just like visiting a foreign country, where the language is different from that which you speak each day, it's helpful to understand a few nouns and verbs in that 'foreign' language, right?  So also with investing; best to start with identifying terms that may otherwise be 'foreign' to you.  You can pick up your copy here for a whopping $2.99:

It follows then, that once we know the 'language/jargon' we'll be a step or two closer to understanding financial strategies, AND why they work.

At Empowered Retirement, Inc., we provide what we feel is important to understand about the markets, and how to construct an effectively diversified portfolio, yet we do so ONLY in tandem with discovering your target

No bowler tosses the bowling ball down the lane without knowing their target in order to score big.  No skeet shooter pulls the trigger without aiming directly at the bulls eye of their target.  No parent enrolls their child in school without a target/goal of that child completing that school year.  Why should your investing be any different?

Too few investors have identified whether they are saving for :

  1. their child's (or grandchild's) education at a State College or Private University, or
  2. a second home where the family would spend vacations, and entertain friends, or
  3. a rental property where the rental income and possible tax advantages provide an income stream, or
  4. a private secondary school for a child's education, or
  5. establishing your own business, or
  6. padding your retirement nest egg, or
  7. annual travel, or extensive-round-the-world excursions, or
  8. paying for flute, piano, karate, lessons, or
  9. providing for a special needs child(ren), or
  10. paying for a parent's elder's care, or
  11. pre-funding a wedding or bar/bat mitzvah, or
  12. insuring your life to plug the 'lost income hole' to those they love, or
  13. buying a boat, or
  14. hiring a personal trainer to regain your health, or
  15. buying a new car, or
  16. buying a new wardrobe at your new reduced size, or
  17. contributing to your favorite charity's fundraiser, or
  18. tithing & giving offerings to your church or synagogue, or
  19. providing gap income for when you morph from full time to part time, or
  20. providing day care for your new born(s), or
  21. funding alternative health scans that aren't covered by insurance, or
  22. transferring assets to your kids and/or grandkids, or
  23. creating your own bitcoin dynasty, etc. - you get the point. 

Clearly, we may be saving for ANYTHING, yet it needs to be SOMETHING!  It's astonishing how much the mere act of defining what we're aiming for, stokes our commitment to achieving it.  At Empowered Retirement, Inc., we help you focus, and we congratulate you on your victories, it's really that simple.

You'll identify your short-term targets and some long-term targets; we'll discuss appropriate timelines and priorities for each goal, and then we'll build a portfolio that we believe--based upon decades of research--will have the best chance of getting you there, with minimal risk(s).

Because each investor is different, each investor's goals have different price tags, and 'due dates'.  So it follows that each investor's portfolio should be built exclusively around matching those goals, and future goals, all the while limiting short-term volatility.  Need there be any more proof that generic 'financial plans' or worse yet 'best investments now' plastered on magazine covers are nothing more than advertising hype?  One size doesn't fit all in investing, so avoid getting swept up into the masses' advice/news/noise...

While some investors may be equipped and disciplined to manage their finances on their own, I've not met them in my 34 years of practice. 

Typically, mature folks realize that they don't have the expertise or training or wisdom required to:

  • perform surgery on themselves, or
  • dare open the hood of our car to pinpoint that darned clicking noise, or
  • fill a cavity in our mouth, or
  • re-wire our house's electrical system, or 
  • coach professional basketball players, or
  • draft their own will and powers of attorney, or
  • excel at most anything professional.

The education, training and discipline that is required in each of these specialties is obvious, yet particularly in the area of investing folks seem to be lured into thinking they not only CAN, they SHOULD do their own investing, since, after all, there's an overwhelming amount of 'financial advice' abounding everywhere from TV, radio, print, social media, and cocktail party banter, to infer that 'investing is easy'. 

So some investors try their luck at day trading stocks, or looming over Value Line or Morningstar reports, or Kiplinger's, Forbes, Money Magazines' latest hot ideas, identifying yesterdays winners, and, invariably, investing at the top.

After all, everyone SHOULD know what they're doing with so much information at our fingertips, right?  Wrong!  The proliferation of information is actually costing us not only significant financial returns (and the lost compounding on same) in addition to costing us valuable time since few people know what they need to know, or where to find it; hence, allow me to grant you permission to turn off and tune out the 'financial news'/noise stations.  Become deaf to their marketing chatter, for your own financial sake and success.

Just to illustrate how investors have sabotaged their returns when they don’t adopt and adhere to, a long-term perspective, take a look at this chart which shows that over the last twenty years, the average investor did substantially worse than major indices; i.e., the 'market'.  Yes, that same elusive 'market' that media talking heads keep talking about BEATING:


Market TIMING is responsible for the big difference in returns.  Some investors might think they know when to buy and sell. Yet this means they have to be right twice: picking the right time to buy and the right time to sell. That is a VERY tall order! 

Even Peter Lynch, the wildly successful stock picker whom managed Fidelity's Magellan Fund from May 31, 1977 to May 31, 1990, during which an initial investment of $1,000 grew to $28,000 called Market Timing a 'myth', saying in a 1996 PBS Frontline interview, "I don't remember anybody predicting the market right more than once, and they predict a lot."  And he was referring to the so-called Market Gurus/Top Rated Economists heading Wall Street firms!  So, our Empowered Retirement advice is, "don't try market timing at home", EVER!

Whatever the reasons people give about their behavior, the results as a whole are shocking. The average equity investor in the study underperformed the S&P 500 by almost 4% each and every year. A gap that large can have a real impact over time on an investor’s long-term goals – and yes, their quality of life.

As you can see, the returns OF the Stock Market (specifically the Standard & Poor 500 Index) from years 1992-2012 were 8.21%, yet the average investor's return for that same period was only 4.25%, a difference of 3.96%!  Why is this?  Most likely because the average investor jumped out of the market and didn't jump back in, until the 'coast was clear' and 'they were comfortable' getting back in.  By that time, the recovery has passed that investor (and millions like them) by; or should I say bye-bye!  Similarly, the Barclays Bond Index returned 6.34% during that same period, yet the average bond investor only reaped .98%, a loss of 5.36%!

The sooner investors recognize that the media's agenda is NOT aligned with their agenda, the better. 

In the case that you may still be doubting my word, here's something more to chew on: