Sometimes I meet people who are stressed out about their investments. They are concerned about possible imminent declines in their investment values or even future returns not living up to past performance. The lurking fear is that they will not have enough money to accomplish what they want to in their retirement. The risks they face may be substantial. The stakes are high, and the dangers are real.
Retirement can heighten the risks you have. Investments that have fallen in value may not have time to recover before you need the money. You may be more dependent on investment income because you no longer have paid work.
Here are three important tools you can use to address your concerns.
Get educated and take a long-term perspective. Newspapers and other media work hard to sell their services. Frightening, even alarming, news tends to sell. Acting on short term advice can too easily lead to getting whipsawed – selling low and buying high. Reacting to current events in this way can be expensive in time and money.
To put things in perspective, find out the research – what has really happened in the past. For example, the media have recently been sounding the alarm about the “inverted yield curve,” when short-term interest rates are higher than long-term rates. Yes, the research says that an inverted curve has frequently preceeded economic downturns. But a sour economy does not necessarily cause stock prices to fall. Thus, the yield curve might or might not be an issue for investors.
Where can you get good research to gain perspective? Not from marketers but from researchers who publish in peer-reviewed academic journals and professional advisors who are familiar with the research.
Concentrate on actions, not outcomes. You may be particularly concerned about how things will turn out. And you may not be able to control the outcomes of what is happening. However, you may still be able to take action. Concentrate on planning for and managing evolving situations. Prepare and get help as needed.
Talk things out. Talking can you give you both emotional and practical support. If you talk with an expert, you can get practical ideas that you can put to good use.
There are certainly no guarantees that situations will develop as you want them to. But preparation and management will help you in two ways. First, your actions may well lead to better outcomes. Second, you will feel more in control of your life, which in and of itself will build self-confidence and more constructive actions.