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Zen Investing

| May 31, 2019

Picture yourself in the most relaxed state possible. You're feeling Zen. Maybe you hear birds, or maybe you're having the perfect massage and there's no hope that you'll stay awake through the whole thing. That's exactly the state of mind I want you to achieve when it comes to investing. Sure, it's challenging, but obtainable. It's a matter of achieving a mindset I call, Zen investing.

The point I'm trying to make is this: securities markets do not have to be scary. If you want, they can represent the opposite - a calm place, where investors can gain some measure of wealth, which leads to a story I'd like to share about the cadence of how those markets can work and please, let this be a relaxing journey.

You've probably heard the expression, "timing is everything." There may be some exceptions to the rule, especially when it comes to the sometimes bad and even disastrous decisions people make when they decide to get in and out of the securities markets, but before this becomes a dull treatise about market timing, an anecdotal tale about the near panicked conversation I had recently with a prospective client.

The stress he was attempting to overcome was directly associated with the almost insane volatility the stock market endured from the end of 2018, through the beginning of 2019.  He could not stomach the ups-and-downs in his portfolio. I invited him for a visit, so we could discuss how to address his exposure to risk.

Ultimately, he decided that his strategy would be to run, wait until things had improved and then get re-invested. He was describing the very error so many people make; lock-in losses and limit gains which feeds into the panic-the-herd mentality that the financial media sometimes foster.

Participation in the securities markets does not need to be a stressful endeavor. If you let them, they can be the source of a gratifying experience, enabling you to out-pace inflation, retire comfortably, or establish a legacy for your heirs, if you wish.

I had the opportunity to appear on a radio program in January of 2019 andinitiated the conversation with this question: is it good, bad or both when the stock market goes down? The answer is, both, yet when commentators describe down markets, you'll sometimes hear this: "A bad day on Wall Street." One broadcaster called the massive Winter 2018 correction, "The worst week on Wall Street, since 2008".  Think about the stress those words caused viewers who live on money they've invested in securities. It evokes memories of the major crash that happened roughly a decade earlier and paints the decline in a purely negative light. It was quite the opposite for younger people and I told my clients who were early in their accumulation years, that the decline may be good news for them. It meant that they could buy into the stock market at a discount. They listened, stuck with the strategy and understood that, when the correction ended, all those shares they bought during the contraction, could reward them.

The same is not true for folks who are at, or near retirement. A sharp decline can adversely impact their income, how long their portfolio will last, or both - which can be a readily available source of stress. The answer - a financial plan that addresses risk, which can involve a multitude of strategies designed to enable investors to retire comfortably and remain comfortably retired.

If you invest your dollars and sit tight, you will likely participate in a variety of market cycles and you could come out ahead. The Dimensional Fund Advisors, 2018 Matrix Book reports that the 1926-to-2017 Standard & Poor's 500 index average yearly return was 10.2-percent. Let's all breathe and relax.

Now, back to that prospective client - fear led to anxiety, which caused stress which prompted retreat - a potentially costly sequence of emotions.

One of my mentors said to me, you cannot control the markets, but you can control how you react to them. I believe that and maybe the same thing is true about life. Be happy, be calm and enjoy.




Past performance cannot guarantee future results. Investing involves risk including the potential loss of principal. Current performance may be lower or higher. No investment strategy can guarantee a profit or protect against loss. Please note that individual situations can vary. The opinions expressed are those of the author; therefore, the information presented in this article should not be construed as investment advice.

The Standard & Poor's 500 (S&P 500) is a stock market index containing the stocks of 500 American corporations with large market capitalization that are considered to be widely held. Indexes cannot be invested in directly, are unmanaged and do not incur management fees, costs and expenses. The information presented here should only be relied upon when coordinated with individual professional advice.