Which Are the Right Investments For You?

Are you sure you have the right investments for you? Dean wasn’t.

His account was flatlining. He had been managing his own money for several years and he’d done a fine job. But the account caught a rare strain of a 2008 “staff” market infection. It didn’t look good for the account or for Dean.

He started 2008 with over $975,000 and now had less than $500,000 left. That’s a big rock to fall off. He wasn’t sleeping well and he was rather snickety with his wife and grown children. He was under a great deal of money stress.

Dean was starting to fall into a depression and he needed help — stat!

OK, I’ll admit…Dean had plenty to be upset about (who doesn’t these days), but falling into a comatose state at this point wasn’t going to help anybody. He wasn’t sure if he had the right or wrong investments. He wasn’t sure of anything at this point. He was frozen.

Here’s the best medicine I know for someone in this situation:

1. Honestly assess the situation.

Are things really as bad as they seem? Is the problem the investments? The market? Are you using investment strategies that work?

Are you going to lose your home? Are you without food or clothing? Are you drowning in debt? Dean wasn’t experiencing any of these problems. He had enough income to survive for the next three years. You may not be as fortunate as Dean but you might also be in a better situation than you think. Write down your assessment and be realistic.

2. What is the problem and what can you do about it?

Dean’s main issue was that the market had operated on his portfolio and decided to amputate. He knew that in three years, he’d have to rely on that significantly reduced sum of money to provide income. He was convinced he had the wrong portfolio.

Ah ha! Here’s something a financial ER doc can work with!

Ultimately, real value of an asset is the ability to create income from it. Granted, Dean’s portfolio had been cut off at the knees and that’s a problem. But the real problem was that the reduced portfolio would yield far less income. This was a problem….but he was far from desperate.

He had plenty of choices:

a. Dean could reduce his expenses.

b. He could work part-time.

c. He could reposition the portfolio to reduce risk and create some potential growth over the next three years.

Ultimately, the doctor prescribed a mild dose of all three. Bottom line: it’s very important to assess the situation without the emotional baggage.

What say you? Is it even possible to keep your emotions at bay these days? What other medicine would you prescribe for Dean? What kind of vitamins are you taking to help yourself and your portfolio get over this flu?