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Risk; Final Words October 4, 2008

Posted by shaferfinancial in Uncategorized.
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In the investment world, like life in general, you can never avoid risk.  Instead of trying to avoid the unavoidable the point is to embrace and manage risk.  The best way to do that is to build a plan and stick to the plan until something fundamentally changes.  Its funny, people have made money trading in stocks, have made money by buying and holding stocks, and by investing in fixed income securities, investing in real estate, but they all say the same thing; I constructed a plan and stuck to it!

What that should tell us is that you need to build a plan that has staying power.  If you are investing in real estate and have to flip a property in a short period of time because of negative cash flow, then you are asking for problems.  If you are investing in stocks and emotionally not prepared for down trends, haven’t plan for them, then you are again asking for problems.  There are ways to invest in stocks that doesn’t depend on stocks going up all the time and there are ways to invest in real estate that doesn’t depend on large amounts of capital appreciation.  That is what I am talking about when I say manage risk and embrace it.

The bottom line is active investors have a plan for all market situations, while passive investors don’t.  Active investors have a plan built on historic evidence, while passive investors don’tActive investors have accounted for all contingencies while passive investors haven’t thought about them. 

At the Shafer Wealth Academy (www.shaferwealthacademy.com)  we think about what history tells us will happen and we plan for it.  You don’t fear what you already are prepared for!