Money & Investing – Banks.com

One of the things that many people wonder right now is whether it is time to get into the market. Are investments returning enough now to get in? While this is a valid question, it can also lead to a dangerous mentality. Not too long ago, I interviewed Craig Israelsen, a well-known financial expert and one of the authors of Your Nest Egg Game Plan: How to Get Your Finances Back on Track and Create a Lifetime Income Stream. (I received a free copy to review, and then spoke to Israelsen, and I am receiving no compensation for sharing portions of the interview.) One of the concepts addressed in the book is the idea that you need to step back and not obsess over short-term portfolio performance.

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“The market is kind of like a yo-yo,” Israelsen told me. “As investors we can get fixated on the volatility of investments from day to day, and we begin reacting to the noise, getting worked up into an emotional tizzy.”

He continued: “Many people get into something because it was hot last year, or six months ago, or last week. That’s chasing returns, and it doesn’t make sense. By the time you get into something like that, it is already likely to be on its way down. You’re not acting on a plan, you’re emotionally reacting to something that was hot.”

Instead of chasing returns, constantly switching out the portfolio, Israelsen recommends taking a step back. He pointed this out about watching your money grow: “It’s like planting an oak tree. You don’t check every day to see if it’s growing. You know that it takes time. Portfolios are similar. They take years and years to grow. It’s an incredibly boring process to grow your money.”

You can see how you might benefit from this type of advice. Rather than getting emotionally involved, and becoming concerned about day-to-day movements can distract you from creating a solid plan to more effectively grow your money.