INVESTING: COMFORT VS. NEED

How should I invest? Of course, the answer is unique to each person based on a variety of factors. Instead of getting technical I want to boil it down to two key drivers, comfort and need.

Comfort means being comfortable with how your investments are performing, in both good and often more importantly bad times (since behavioral economics studies have shown that loses hurt twice as much as gains feel good). If you are comfortable and confident in your investment strategy, you are much more likely to have peace of mind and avoid poor decisions.

Need is the purpose of your investments. What is the money for? The most common answer I see is retirement. When the paycheck stops, savings will provide much of the income needed to live. It is necessary to take inventory of your resources and your future needs to evaluate if you are on track to meet your objectives.

Comfort + Need When the two align it is beautiful (yeah, I’m a finance geek). Unfortunately, this isn’t always the case. The most common mismatch I see is a desire to be too conservative. An emphasis on comfort can lead to lost opportunity and a shortfall in your plans (i.e. running out of money). Though not as common but still relevant (especially for entrepreneurial types) is being more aggressive than you need to be. This can increase the odds of loss and derail your plans.

Take away: A properly designed investment strategy will address both comfort and need, providing you the best chance of meeting your objectives with a sense of confidence.

Tools (email me and I'll send you links):

Risk Tolerance - This helps evaluate the comfort side of the equation. My caution is that it is only one side of the equation. Too often people (even advisors) use this tool alone, which is very dangerous because it doesn’t tell you if you’re on track to meet your needs.

Financial Plan – This evaluates the need side of the equation and sets targets to let you know if you’re on track. Pair this with the tool above and you’re off to a good start. Email me for a personalized link to a free basic version of the planning software I use, and I’ll set you up. Once logged in it takes about 10 minutes to go through the setup process. 

Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557