Fear: Be It Zip Lining or Investing, It Destroys

 Fear: Whether Zip Lining or Investing,

It Drains Us Of Strength, Clouds Our Judgement

by: Brendan Magee

Fear is defined as a distressing emotion aroused by a real or imagined threat. Fear disrupts our lives, drains us of our spiritual strength, and clouds our judgement. At least that is what the pamphlet that I read just before embarking on a zip line adventure. 

To be truthful, as my guide, Emily, was helping me into my harness, I was thinking of some of the threats to my well being that comes when you are going to be anywhere between 25 to 65 feet in the air hanging by a wire. Forget about the fact that I was safely going to be hooked up to safety lines and the likelihood of falling was minimal. I was quite distressed. 

With a little time to ponder before hitting the zip line course, I thought about the role fear plays in the lives of investors.  There is plenty to be fearful of. What if the stock market crashes? What if my financial adviser turns out to be a crook and I lose all my money? What if I lose my job? What if I get sick? What if I don't save enough? How will I survive? 

Is there an investment decision we make that isn't some where rooted in fear?

We might not see it this way, but fear steals from us. It destroys our hope in the future and it robs us of the joy of living. 

If we walk around with a fear of the stock market crashing, by all costs we want to avoid that. We don't put a penny of our money in stocks. We play it safe and only go with guaranteed investments. Sure the three or four percent return won't keep pace with inflation and most likely I will out live my savings in retirement, but I don't have to live with the never ending fear of when will the stock market crash. Meantime, I have missed out on the annualized 11% the S&P 500 has done over the past thirty years as well as any chance of living a secure and comfortable retirement. 

If we walk around fearing being taken by a self serving financial adviser, there's no way in hell I am going to risk having my money stolen. I will just invest my money on my own. Who cares if I don't know how the stock market works or where returns really come from. If the market goes down, I will just get out until the market goes back up then I will reinvest in the market. I know I can't buy high/ sell low and be successful, but I just can't stand the thought of falling victim to an unscrupulous investment adviser.

Might not seem as if any of these scenarios could befall you. They are too simplistic, but every day, more people then you can shake a stick at are making decisions with their money which are totally based on fear. As we said earlier, fear clouds our judgement. We can't possibly know where the runway is if it is clouded over with fog. 

The only way for investors to begin to overcome their fears is by, first, admitting they have them. Until our fears are acknowledged poor decisions and behaviors will continue. Next, we have to admit that we can not overcome our fears on our own. We need a coach. Not only did I need my coach's knowledge in safely getting around the zip line course, I needed her encouragement and a gentle push every now and again. 

I don't think it is any different for investors. When we acknowledge our fears and surrender to the fact that we cannot control them on our own, we get back the strength, joy, passion, money, security and freedom that our fears stole from us.

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments e-mail brendan@coachgee.com or call 610-446-4322.

I Didn't "Intend" To Market Time

I Didn't "Intend" To Market Time

                      by: Brendan Magee

I can't think of a word that has gotten more attention then the word "INTENT." F.B.I. Director James Comey brought a lot attention and shook the heads of a lot of people when he decided that charges should not be brought against Hillary Clinton because she didn't INTEND to harm the country with the use of her personal e-mail server during her tenure as Secretary of State.

Most of us have to live in a world where we do not get to split hairs. We have to live with what we did, not what we intended to do. Run a red light and telling the police you didn't intend to run the red light won't get you out of the ticket. Cheat on your wife and telling her you didn't intend to hurt her probably won't get you out of a big fat divorce settlement.

Investing is an area where intent can often overshadow the good or bad that results from our decisions. Market timing is defined as any attempt to alter or change the mix of a portfolio based on a prediction about the future. The definition seems pretty clear. Doing anything based on a prediction is market timing. The problem with market timing is that no one can consistently predict the future. Hence, if you engage in, or allow your adviser to engage in, market timing you are going to more often then not guess wrong and cost yourself money.

The Prudent Investor Rule circa 1990 spells this dilemma out pretty clearly, "Bargain shopping in an attempt to separate the winners from the losers based on a forecast about the future is deemed wasteful. 

What can cloud the issue and get us to engage in wasteful behavior? Instincts and emotions. I recently had a discussion with a colleague who was a proponent of  guaranteed annuities to protect against the drops in the stock market. Now this is not a dishonorable person. He genuinely has the best interests of his clients at heart.

We need to step back and look at what is driving his decision here. He doesn't want to see his client's money suffer a major loss such as 2008. Now all the losses he is fearing have happened in the past, 2008, 2002, etc. The crash he is trying to help  his clients avoid is some point in the future. He doesn't nor does anyone else know when it will occur or how severe it will be. Hence, he is investing money based upon a prediction or forecast about the future. He has unintentionally engaged in market timing.

Now what is wrong with that? There are rules for successful long-term investing that have to be followed at all times, Own stocks or equities, diversify, and buy low/sell high. These are no different then eat right and exercise as far as health is concerned. Following the rules isn't always easy or comforting, but we all know the penalties if we break them.

From January 1, 1996 through December 31st, 2015 there were 5, 040 trading days. If at the beginning of our time period you had invested $10,000 in U.S. Large Company Stocks and stayed invested all the way through, enjoying all the good days and enduring all the bad days, your investment would have grown to about $50,000. If you at some point decided to get out of the market and avoid what you felt are going to be some bad days for just say 20 days and those days were among the best 20 days (only 20 out of 5,040 days) your $50,000 account would only have grown to $20,000. (Investing involves risk and returns are not guaranteed)

The problem is no matter how noble the intention of helping someone avoid losses in the market is, no one  knows with any certainty when the good days will occur or when the bad days will occur. What we are also forgetting here is that avoiding the bad days doesn't even matter in the long run. All that mattered was  maintaining the discipline necessary to follow the rules for successful investing.

So know when you engage in or allow someone else to engage in market timing with your money you are not breaking the law and you will not face a federal investigation. History shows that you will most likely be costing yourself a whole lot of money and all the possibilities that go along with it.

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments e-mail brendan@coachgee.com or call 610-446-4322.

Prayers Asked & A Lesson To Learn

Prayers Asked 

& 

A Lesson The Lesson Of A Lifetime

by: Brendan Magee

You or a loved one is doubled over and can't breath. Your arms and legs are going numb and you have a history of high cholesterol. What do you do? Take your loved one or get someone to drive you to the hospital and get checked out. You don't wait. It's not a hard situation to figure out.

It's a situation that a friend of mine was personally dealing with recently. As he was asked several times if he was alright and did he want to go to the hospital, he always responded that he was fine. He was so fine that he just recently suffered cardiac arrest and is not in the best of circumstances right now. I ask you to keep him and his family in your prayers.

We all know the right thing to do under just about any circumstance so long as it is happening to some body else.Your chest is tight and heavy. "I don't want to go to the doctors and be hooked up to all those tubes. I don't want to die! It will probably go away in a few minutes."

Theory is so much different than reality. We can be way too quick to believe that under any and all circumstances we will be able to act rationally. This is true whether it be dating, our health, or our investments, but the reality is that we, are not. All you have to do is look at the presidential election. Do you really think rational thought has led us to the candidates we are most likely going to be choosing from?

When it comes to investing we already know what to do in order to be successful. Own equities, diversify, buy low/sell high. We have all heard these rules, especially buy low sell/high. They are not difficult to understand, but following them day-in-day out is not as easy as it sounds.

The British decide to leave the European Union and the stock market goes a bit hay wire. All the experts are on t.v. telling us the world will never be the same again. Everyone is in a panic and asking, " What should I do now?" You already have the answer, own equities, diversify, buy low/sell high. Why is their any confusion?

The answer is instincts and emotions. It's painful to think for one second your life savings is in jeopardy. You get scared that tomorrow you will be living on the street. You have to do something. Who cares about those damn rules. "We got to get out of the market! Sell every thing and put it in cash or a guaranteed annuity. Any body else and you give a calm "You got to keep the long-term in mind. The market always comes back. Don't panic response."

The lesson of a life time is that investing success or failure is a direct result of what the investor does or doesn't do/ What they allow and don't allow to be done with their money. This more than anything will determine an investors fate. Their decisions come from their brains which is where knowledge, instincts and emotions reside. If we can get that when it comes to investing our instincts and emotions cannot be separated from our thoughts or behaviors.

They will be leading the way in our decisions, and history shows that, repeatedly, those decisions will be wasteful.To guard ourselves from our instincts and emotions, starts with acknowledging that we, on our own, cannot protect ourselves from our instincts and emotions. We need to put that job in the hands of someone we trust and never deceive ourselves into believing we can do that job by ourselves.

Our coaches job and ours along with it will be managing a never ending flow of thoughts and ideas that  occur in a flash and on a 24 hour-7days a week -365 days of the year basis. We can only interrupt this pattern if we stop for a second and ask someone if our decisions and behaviors are consistent with our ultimate objectives. Once you do, you will hear and hopefully respond to answers like "No get yourself to the doctor now, not in two weeks. No we are not selling just because Jim Cramer told you the market was in a free fall"

Strength and wisdom are the result of acknowledging our lack of strength and wisdom. Your pride may sting a bit when you swallow it at first, but you and your family love the long-term results.

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments e-mail brendan@coachgee.com or call 610-446-4322.