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Fear Is The Enemy! November 7, 2008

Posted by shaferfinancial in Uncategorized.
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I spend a good part of my working day talking to people about financial things.  Almost everyone I talk to expresses some degree of fear when it comes to finance.  Now fear in small amounts is a good thing.  It focuses the mind, and encourages us to think about all the possibilities.  Warren Buffett thinks that by concentrating one’s investments, fear becomes an ally, forcing folks to really do the necessary fundamental analysis.  I think he is right.

But, extreme fear mixed with strategies sold on reducing risk is not a good thing.  It’s what causes people to make really bad decisions, like selling their mutual funds in a bear market.  And that, unfortunately is what I have been seeing out there.  If people aren’t selling now, then they are ignoring the reality of what has been happening for nine years now!  The only way people can ignore the facts is by not doing their own research.

I hear many of the pundits tell folks that they can’t perform fundamental research like Mr. Buffett, they just have to trust the “professionals” and stick to the buy mutual funds, hold, and asset reallocate strategy.  In my opinion this only produces more fearful people, more inclined to do the wrong financial things.

There are a small percentage of people who, no matter what, are going to be too fearful to invest in the stock market, even equity mutual funds.  Unfortunately, these folks will probably not have a good retirement.  These folks should stick to savings accounts, CDs, and guaranteed insurance products.

The majority have the capability to change their financial behavior.  I have found from personal experience and my wealth coaching, that the key is to take the time to learn how to do the analysis.  From this, flows confidence and self assurance that tampers down one’s fear to a manageable point.  Like I said, a little fear is a good thing as long as it is based on something real.  Once you manage your fear, you can move beyond those strategies that were created to allay the fear of customers and resulted in large reductions of investment rates of returns, like diversification and guarantees.

I have personally met several folks who made themselves millionaires by investing in a single stock (a couple of them worked for the company too).  Microsoft, Coca Cola, Berkshire Hathaway, and General Electric were the stocks.  Now all but the Berkshire Hathaway owner and the Coca Cola owner sold their stock when the fundamentals starting going awry.  I have a friend that works with wealthy retirees.  Guess what they tell him.  Almost to a person they made their wealth with a combination of real estate and a couple of companies stocks.  Many of these folks are living off the dividends from these blue chip stocks.  Here are a couple of articles about folks who became millionaires by either buying a single company stock or by stock options from working at a successful company. 

Coca Cola Millionaries

Microsoft Millionaires

Give me a call so we can conquer fear and get you on the road to a comfortable retirement!

colasign

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