Anna Mate

Archive for January, 2010

It seems like just yesterday that we were in one of the biggest bull markets in U.S. history Whenever I went to a cocktail party or an even less formal get-together, I would overhear people touting the hot stocks they’d just bought and sold. Often they would ask for my opinion—or approval. Even then their stories made me cringe, because even though they may not have known it, they weren’t investing—they were gambling.
Unfortunately, misconceptions still abound. Phrases like “playing the market” sound far too much like “playing baccarat”—way too risky and complicated. So before we go any further, I want to emphasize that this is not responsible investing. To think otherwise is a myth. As Jane Bryant Quinn said in her parting column for the Washington Post: “Luck isn’t a strategy. It’s only luck.”
That said, times do change quickly. The past couple of years have seen some serious ups and even more serious downs. As I write, all of the major stock market indexes are significantly below their highs of the year 2000, and we’ve seen countless investors lose significant portions of their wealth. So on the one hand, this is a sobering time to be writing about investing. On the other hand, it maybe the best time of all. After all, downturns are a normal part of the stock market’s cyclical behavior, and you have to be prepared to deal with the downs as well as the ups. The goal of this chapter is to give you timeless advice that will take you through the good times and the bad, so that in the long term you and your family will end up on top.
While everyone needs a sound investing strategy, your family’s plan will look different from anyone else’s. Having covered the nuts and bolts of investing, it’s time to get you thinking—and talking—about the strategy that best fits your individual situation and goals. To that end, we start this chapter with a questionnaire that will help you better understand yourself and your family members as investors and point you to an appropriate asset allocation. We then jump right in to help you evaluate different investments and create a well-diversified portfolio. If you feel you need a bit of a refresher on some basic rules of the road.
One reminder before we start. With all this talk about money, you’d think that making that almighty dollar was the be-all and end- all. It’s not. I’ve said it before, and I’ll say it till the day I die: Money has no value in and of itself. It can, however, provide you with the personal power to make choices and pursue the life you want. In that capacity, it’s downright critical. This means you need to know—and discuss—the fundamentals about investing it and managing it, so you and your loved ones can make the most of what you have.

Many investors come to a point when they consider getting professional help with their investments. Often time is the reason; they simply feel unable to give their investments adequate attention. Or maybe the reason is interest some people just get tired of handling it all. A down market con also cause people to consider professional help; after some losses they decide that managing their investments themselves just isn’t as easy as they thought it was. But whatever the reason, deciding to enlist the help of an investing professional can be one of the best investing decisions you ever make.
To decide if it’s time to get professional help, think about where you are in your investing life. I see investors on a sort of continuum, from the completely independent investor who wants to manage his or her investments, to someone who wants a little validation or coaching along the way, to the person who wants to delegate all of the responsibilities that accompany managing a financial portfolio. For most investors, things are least complicated when they’re at the beginning of their careers and just starting to invest, Over time people often move toward the middle of the continuum:
Maybe they want some help with the fixed-income piece of their portfolio, but they feel confident in managing their equities. That’s where I fit in at the moment I use financial advisors in a couple of areas where I know I need some specialized expertise, but I’m very much involved in that big picture, sort of like the quarterback of the team.
If you too decide to get help, look for help that’s expert objective, and personalized Know whom you’re hiring and what they’re providing for you at what cost and make sure they know what you expect in return. And once you have help, don’t coast Stay involved and in formed and knowledgeable, even if the person you’ve hired is handling all the day-to-day work for you. You owe it to yourself—and to your future.

Feeling like you and your family are in this alone and getting in over your heads? Don’t Though my father and I firmly believe that everyone should take an active role in his or her finances, most of us benefit from some professional advice  —at least from time to time.
Let me digress for just a minute. A couple of years ago a friend gave me a gift certificate for several sessions with a personal trainer. I’ve been pretty active all my life, so my initial reaction was “I don’t need that. I know how to work out on my own.” But because I had the certificate, I made the first appointment. I’m sure you know where this story is going. That first session was great, and subsequent sessions even better.
In short, I was hooked. I started to see results and looked forward to coming back. I liked the companionship; it gave me that extra bit of incentive to work hard. I also liked learning new training techniques and ways to optimize my workouts. And when you meet a good financial advisor, the experience can be very similar. Not only can consulting a professional jump-start your financial fitness, but it can also help you hang on for the long term.