by Doug Goldstein CFP® | May 8, 2018 | Decision Making, Strategic Thinking |
If you want to be a successful investor, your first step is to create and follow realistic financial goals. Why is this important? When people invest without a particular goal in mind, their investments lack focus and they change strategies frequently. A clear goal keeps you on a definite path and you are less likely to get distracted. In defining your goals, don’t let your parents, boss, or friends dictate your direction. Think about your specific desire, write it down, and then figure out how to get there. Is your goal realistic? Once you’ve decided upon your goal, see if it is realistic. Here’s where it helps to get some outside advice, whether from a friend, family member, or professional advisor. For example, let’s say your goal is to retire at age 55 and you calculate that you’ll need $4 million in savings to achieve the lifestyle you want. You divide that amount of money by the number of years until your desired retirement age. But is this realistic? If you’re 51 today and you earn $100,000 per year, there is no way you can save $1 million a year for the next four years. On the other hand, if you’re 25 with a great income and you can figure out how to save $60,000 every year, you could very possibly reach your $4 million goal if you earn enough to meet your savings target and if you average a 5% return on your money over the next 30 years. Make sure you make a distinction between a realistic goal and a wish. What you can learn about goal-setting... Click for more
by Douglas Goldstein | Oct 19, 2016 | Financial Strategies, Podcasts |
What happens if you miss an investment opportunity? Are you doomed to have lost the chance to have made money? Luckily, successful investing rarely involves making once-in-a-lifetime choices. The majority of Wall Street wealth was not made timing the market. Perseverance, rather timing the market may be the key to financial success. Listen to the story of how the Hungarian government tried to stop Susan Polgar from competing in international competitions during her youth, and what it teaches about using available opportunities. Get information about our upcoming real-life finance course and send your financial questions to be answered on a future... Click for more
by Douglas Goldstein | Sep 6, 2016 | Decision Making, Financial Strategies, Podcasts |
What do you need to know before buying a stock? Don’t base your decision on a vague piece of financial news. Look at more specific details, such as a company’s earnings and value. What do these terms mean, and which aspects are important? Find out what a company’s price/earnings ratio is, and how this would affect your final decision. Get information about our upcoming real-life finance course and send your financial questions to... Click for more
by Doug Goldstein CFP® | Apr 14, 2016 | Behavior finance, Decision Making |
If you are thinking of selling an investment, beware of the disposition effect. This occurs when investors hold onto their losing investments for too long and sell their winners too soon. The disposition effect often causes investors to sell the wrong investment. What should you sell? If you need to sell one of your investments, which one should you choose? Should you sell a stock that has made a profit, or should you sell an underperforming stock that has dropped? The disposition effect occurs when you automatically sell (dispose of) your most profitable investment and keep your losers as a matter of principle rather than as a reasoned decision. Why would you do that? Perhaps you think that you’ve gotten the most out of the stock, and you hope that the poorly performing investment may make a profit eventually. This is an erroneous assumption. Professor Terrance Odean of the University of California researched the trading patterns of tens of thousands of investors, and found that people sell winning investments because they like the feeling of selling at a profit; it provides lots of “bragging rights” as they can tell their friends that they made an amazing profit on the stock market, even though according to logic, it may have been better to dump the least profitable stock. By selling the loser, they can get a tax benefit from selling at a loss, and their winning stock may make them even more money if they hold onto it. Yet the satisfaction from profiting from a winner blinds them to the real benefits they may derive from selling your loser. Follow... Click for more
by Doug Goldstein CFP® | Mar 31, 2016 | Decision Making |
Even if you have a close relationship, it is often tricky to talk about money with your spouse. And tactful conversations get more challenging when you think your spouse is making financial mistakes. Here are some core rules for discussing money with your spouse, so that any discussion about money will be as productive and pleasant as possible: Talk openly about money Marriage is a partnership, and handling money should be a joint effort. One spouse shouldn’t control all of the money on his or her own. This is true regardless of who the main breadwinner is, or even if one spouse is a stay-at-home parent. Sometimes, partners can’t agree on which financial moves to make. If this is the case, defuse this emotional pressure by delegating the final decision to professionals, such as financial planners, investment advisors, or budget counselors. Keep a record of all financial actions Make sure both spouses keep a detailed record of all money transactions so that it will be easy to access data in the future. Detailed records also ensure that all financial topics are laid out openly on the table. The financial record should include: Credit report (Don’t have a credit report, or want to learn more about it? Click here for more information.) Stock and bond reports (Find out what to look at on your brokerage statement by clicking here.) Bank account information Pay slips Budget Financial plan Once all this information is put together and out in the open, you can begin to work together. Start with a monthly at-home date to discuss your expenses. Make this date fun. Mix... Click for more
