Finances in Focus

finances-in-focusWithin the gay community, there’s no “holiday” which receives more recognition — deserved or not — than Halloween. This may be February and the holiday might be past, with its plethora of skeletons and ghosts put away for yet another year so you might feel that with it come and gone, you probably don’t have much to fear (except, possibly, running out of leftover candy). But in real life, some things genuinely are frightening — such as “scary” investment moves.

Of course, investing, by its very nature, is not a risk-free endeavor. Ideally, though, these risks are also accompanied by the possibility of reward.

Nonetheless, some investment moves carry very little in the way of “upside” potential and should be avoided. Here are a few to consider:

Not investing — The scariest investment move you can make is to not invest at all — because if you don’t invest, you are highly unlikely to achieve a comfortable retirement or meet any other important financial goals. In a recent survey conducted by the National Council on Aging and other groups,

45% of the respondents who were 60 or older said they wished they had saved more money, and almost one-third said they wished they had made better investments. So make investing a priority — and choose some investments that have the potential to provide you with the growth you’ll need to meet your objectives. It’s OK to be cautious (It’s your cash.) but do not let fear rule your day. Invest and do so wisely and you’ll have nothing to fear when retirement day comes.

Overreacting to “scary” headlines — The financial markets like stability, not uncertainty. So the next time you see some news about domestic political squabbles or unsettling geopolitical events, such as conflicts in foreign lands, or illnesses like Ebola, don’t be surprised if you see a drop — perhaps a sizable one — in the Dow Jones Industrial Average and other market indices. But these declines are usually short-lived.

Of course, the markets do not exist in isolation — they can and will be affected by what’s happening in the world. Yet, over the longer term, market movements are mostly governed by mundane, non-headline-grabbing factors, such as corporate earnings, interest rate movements, personal income levels, and so on.

Here’s the point: Don’t overreact to those scary headlines, or even to short-term market drops. Instead, focus on the fundamentals driving your investments — and maintain a long-term perspective.

Chasing hot investments— You can receive tips on “hot” investments from multiple sources: television, the Internet, your friends, your relatives — the list goes on and on. But by the time you get to these investments, they may already have cooled off — and, in any case, may not be appropriate for your needs. Stick with investments that offer good prospects and are suitable for your risk tolerance. Don’t get sucked in by those “spam” e-mails we all get from time to time claiming some 40 stock will make you rich, because 99 out of 100 times, it won’t.

Failing to diversify — When it comes to investing, “too much of a good thing” is a relevant term. If your portfolio is dominated by one type of asset class, such as aggressive growth stocks, and we experience a downturn that is particularly hard on those stocks, you could face sizable losses.

But if you spread your investment dollars among growth stocks, international stocks, bonds, government securities and certificates of deposit (CDs), you can lessen the impact of a market drop. Keep in mind, though, that while diversification can reduce the effects of volatility, it can’t guarantee a profit or prevent losses.

Remember that October and Halloween are over quickly, but scary investment moves can have a lasting effect — so stay away from them. What you do now will have an impact on your life, and your financial health many years after the last of the pumpkins have rotted and the last mask is back in storage. Invest wisely and Happy Thanksgiving. Here’s to no market “turkeys”, just the edible kind you’ll be sharing with friends and family later this month! 

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