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How to stay positive

11 10 2011

  by Michael Carignan, CFP®, CRPC®

Over the last few weeks I’ve spoken to several people that asked me how I can stay positive in the current financial/economic/political environment.  I could say that in large part it goes back to my days in military school where so much of my life was unpleasant and out of my control.  I had no way to affect the mood my platoon sergeant had in the morning and if I constantly spent all of my time worrying about what might happen to affect his mood not only would I have been miserable I wouldn’t have been able to get anything accomplished.   Ultimately, I determined that the best way to get through each day was to focus on what I could positively affect and roll with his moods as they came.  Did they affect my outlook occasionally?  Sure they did.  But I didn’t change my ultimate goal for being at the Citadel because he happened to be having a bad day.  I tolerated the short term pain he dished out and kept my eye on preparing for graduation and beyond.

THE ISSUES

Now I will grant you that the issues we are all facing in the news and in the financial markets may seem considerably more daunting than what I faced in school, but the mental outlook and subsequent successful actions really aren’t that different.  When I ask how people are feeling right now, much of the time I hear comments about the European debt crisis, the gridlock in Congress, the roller coaster ride that is the stock market or one of a number of political issues.  These are all issues that are completely outside their direct control and yet these issues are affecting how they live their daily lives.  They find themselves obsessing about the news they are seeing in the media,  and tend to devote an inordinate amount of time to discussing and debating these issues with their friends and colleagues.  Each of these people have unique challenges in their daily lives and long term goals that they can affect — but they aren’t because they’re “too busy” worrying about things beyond their control.

GET A PHILOSOPHY

Financially speaking – if you find that you are getting caught up in the daily media hype, what’s the first thing you need to stay focused on the long term?  A Philosophy!  Many investors just put their money away in their 401(k) plan and “hope” it will grow over time, but they have no philosophy to guide them to success.  They just pick the fund that has the best rating, or performance over the last year or 5 years or ten years – and stick their money there.  Ultimately, the result is that they are at the whim of the markets; consistently frustrated by mediocre performance.  In many cases they feel as if they’ve been treading water and making no headway towards retirement for years.  Having a long term investing philosophy helps investors temper the legitimately poor news regarding the economy and stay focused on a disciplined long term approach.  This gives the investors with an investment philosophy a higher level of emotional control.

CONTROL WHAT YOU CAN

Control what you can.  The primary benefit of having a philosophy is that it affords you the mental preparation required to control one of the most natural – but hardest to control instincts  – the need to “DO SOMETHING.”  This feeling, this urge – is the instinctive “fight or flight” response that is hardwired into every human being.  When the news gets bad and you’re watching your retirement accounts decline, the first reaction is to stop that pain as soon as possible, which in many cases means jumping out of the markets at the worst possible time.  Unfortunately, the mediocre results most investors have achieved over the last decade can be laid at the feet of this basic instinct.  Choosing an investment philosophy, and most importantly sticking to it, will allow you to control your emotions and maintain a coherent investment plan.

BENEFIT FROM THE “DO SOMETHING” INSTINCT

There is even a way to channel that basic instinct to “do something” into activities that may be positive for your financial future.  Instead of dwelling on poor market returns, take the time to make sure all of the other components of your financial house are in order.  Do you have a current estate plan?  Is it up to date?  Do you have room to save more in your budget?  Are your emergency plans in place in case something happens to one of your family members?  Answering these questions and correcting any deficiencies in those areas is a great way to feel like you’re having a positive affect on your financial future even in times of market turmoil.

SET A PERSONAL GOAL

Another way to keep those emotions in control so your investment plan can benefit from a long-term philosophy may be to set a personal unrelated goal.  Perhaps deciding to run your first 10K or half marathon is the answer.  Maybe lose those 10 lbs that have been bothering you… or learn a new language so you can benefit from your future travels that might be possible from your successful investment philosophy.  Whether it is a fitness, diet or educational goal is less important than positively occupying yourself, accomplishing something new, and achieving personal growth.

REMEMBER THAT BAD NEWS SELLS

A positive mental outlook isn’t always the easiest thing to maintain especially during times of crisis.  I can tell you that I have been guilty of  being “Grumpy” recently and that has inspired me to write this blog.  There are ways to “do nothing” and have a positive impact on your mental outlook.  Turn off the media when looking for good news, instead spend some quiet time with family or friends.  The tone of the news coming from the media will change over time – but one thing is likely to remain the same:  Bad news sells.  The media will always sensationalize bad news because that’s where the money is.  So don’t obsess on the news you don’t like but can’t change directly; instead use the opportunity to hone the life skills that you need to be a better investor.

This blog post is for informational purposes only.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  Past performance is not a guarantee of future performance.  This message is NOT personal investment advice and should not be taken as such, nor is it a recommendation to buy or sell any security.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services offered by Paragon Wealth Strategies LLC, a registered investment advisor.


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