Why should I invest?
Very often investors are displeased with their experience in the market and therefore they look towards a more satisfying experience, one that can lead to a higher likelihood of success, an experience that can help them towards their goals.
Nurses very often have great benefits through their workplace but they still need to create an investment plan and understand the purpose and goals of their investments both inside and outside of the workplace.
People obviously have different financial needs and goals, and therefore the reason why they invest is different and their time frame is different as well, but everyone wants to know what it is they are doing and what impact it will have on their money in the short and long term.
One investing objective could be to grow wealth in preparation for retirement, another could be to pay for kids college planning or future major purchases and no matter what the reason for accumulation of wealth there is a great concern that creates a big threat to a person’s money and that is the threat of inflation and increasing cost of living.
Investing means taking risk? Not investing means taking risks, too!
By understanding how inflation can affect your wealth over the long term deciding not to invest also means taking on risks.
If your money does not grow you lose purchasing power over time and might not be able to afford the same lifestyle in the future as you have today.
There is no doubt that having money invested in the market has some risk to it but by understanding and developing long term plans a lot of that risk can be minimized.
So how do people who invest grow their wealth?
A lot of people decide to utilize the financial markets as an avenue for growing their wealth—and the encouraging news is that the financial markets have historically compensated long-term investors.
Over time staying invested in the markets for longer periods have improved a person’s likelihood of beating inflation.
One thing to take away from the stock and bond performances is that not all stocks, or bonds, are the same.
It is though important to understand that there is risk and uncertainty in the markets and that historical results may not be repeated in the future.
However, the market is constantly pricing stocks to reflect a positive expected return going forward.
If that was not true people would not invest their money.
The most common approach is based on prediction and forecasting. Methods include:
- Picking stocks that are expected to perform well in the future
- Moving in and out of different industry sectors
- Trying to time the market
These approaches are based on trying to predict the future course of the economy, the stock market, or an individual stock.
This conventional style assumes that someone can predict what will happen in the future.
A prediction about an uncertain future is just an opinion, and it should not control anyone’s investment decision.
Many people learn this the hard way.
Many people approach their investing from an emotional standpoint and they act spontaneously—and very often their reaction is sparked by fear or greed.
People may get nervous about the stock market and decide to get out.
This may ease their fear, but it may be replaced by the anxiety of missing out on a market recovery.
Investors who decide to get out of the market ultimately have to decide when to get back in and they are again predicting and trying to time the market.
The 2008–09 global market decline shows a great of how the cycle of fear and greed can determine an investor’s decisions.
Some investors got out of the market in early 2009, just before the recovery started.
They locked in their losses and then experienced the anxiety of watching the markets climb.
The other side of the emotional behavior is greed.
Investors will often get anxious about missing out on what they observe as a great investment and may just follow the crowd.
The big picture reason behind investing is to buy low and sell high.
However, when people follow an emotional investment path sparked by spontaneous decisions it may produce opposite results: buying at high prices and selling at lower prices.
A lot of other people invest based on what they hear on the news, in money magazines or what their friend’s tell them.
They try to create an investment plan that will get them rich quick. A lot of people fall into get rich quick plans that very rarely produce any good results.
We all understand that building wealth is a long term plan and that’s how it is in the markets as well.
THERE IS A BETTER APPROACH!
To create an improved investment experience it helps to focus on areas and things that can be controlled. A plan should be based around market principles, financial science and a plan should be tailored to fit into a client’s overall financial plan. Staying disciplined, managing portfolio expenses and turnover while maintaining a broad diversification is part of a solid plan. Provided knowledge and strategies will help ensure that investors stay disciplined throughout different market conditions.
Markets are expected to be efficient and people already trust pricing in many different areas of everyday life. The financial markets work the same way and
One of the most important parts of a long term investment portfolio is to diversify risk and capture what the global markets offer. Diversification can help reduce being invested in the wrong companies. Diversification can help you miss out on opportunities in the market and can possibly create a smoother ride with less bumps and being diversified can help take the guesswork out of investing.
Humans are really not wired for disciplined investing and get emotional about markets moving up and down and tend to apply fault reasoning to their investment plan therefore it is important to create a plan that is built up around the areas of what can be controlled.
No one can reliable forecast the directions of the financial markets.
The top areas that can be controlled are:
- Create an investment plan that fits into your needs and risk tolerance
- Structure a portfolio around an efficient market
- Diversify broadly
- Minimize expenses and turnover within the portfolio
- Minimize taxes