Matson on Investor Emotions

You will often hear so-called investment experts say things like, “You have to eliminate feelings from the investment process.” There is only one problem with that: It is impossible. No one can completely eliminate feelings and emotions from the investing process, because everyone is human. Pretending otherwise and believing your emotions won’t come into play is a recipe for disaster.

Matson On Dysfunction Loves Secrecy

Most of us have been taught that investing is a solitary experience; that what we do is we go and meet with our financial planner or our financial advisor, and don’t talk about money with others, don’t share what is going on, and certainly don’t share your fear, or your apprehension, or your goals, or your feelings. We are led to believe that we should do this in isolation.

Instincts plus emotions plus perceptions are twisted and take over in isolation. But human beings are meant to live in community, in support of each other. It’s the fear of sharing our own emotions and failed behavior that keep us stuck. However, we gain strength by sharing our experiences, fears, and hopes. And we do that best in groups. To be successful as an investor is to take strength and hope from others, to share our experience, to know we are not alone when the market goes down 30 percent or when we see an advertisement for gold up 80 percent. It helps us to know that there are other people struggling with the same things that we’re struggling with and the same fears that we struggle with, where it’s the economy, struggles at home, the loss of a job, or health issues. All of these things can exacerbate the situation. When the market crashes or there are bad periods, and you combine that with health problems, or problems with children or problems with jobs, it magnifies the fear. It makes things worse. To be a successful investor, requires the support of a group. When we’re in a group, we understand ourselves when we share. You learn from other people’s experience, and then learn that you’re really not so different after all.

Wednesday Wisdom from Main Street Money

Matson On The Financial Media

They need readers and viewers to sell advertising. It is all about profits and the way to keep you watching and reading is to tap in your emotions, instincts, and perception biases. They magnify the urge to speculate and gamble. Many of them believe it is their job to help you forecast the future, a futile exercise. They believe the lies and perpetuate the myths. If it bleeds it leads, and if it is up 100 percent in the last year, everybody will be talking about it, no matter how imprudent it is. Think of this as financial pornography. Its job is to seduce and titillate.

Elections Impact on the Market

Now that the election is over, investors are wondering what the future has in store for their portfolios. The reality is that while elections may have short term impacts on the markets, over the long run, the impact is minimal. A Free Market System is based on capitalism, which always finds a way to thrive. Our structured portfolios are based on a long-term investment philosophy and will be more efficient than active management if and when taxes increase. Our portfolio managers at Matson Money are prepared to rebalance if necessary to ensure you maintain your expected risk tolerance level.
So what should you, as an investor do now?

1. Stay positive. Nothing beneficial has ever come out of being negative.

2. Get educated to break the investor’s dilemma.

a. Fear of the future leads to trying to find someone who can predict the future.

b. Since nobody can predict the future accurately, investors look to track record investing, which academically has proven to be disastrous.

c. Trying to find the right answers leads to information overload, which leads to frustration and emotion-based decisions.

d. Since we as humans gravitate toward pleasure and retreat from pain, we break the rules of prudent investing and sell investments that are doing poorly and buy what’s increased in value.

e. This, in turn, leads to performance losses, which leads to more fear of the future. The investor’s dilemma starts all over again in a never-ending cycle.

We, as investor coaches, are here to help you break the investor’s dilemma and tune out all the media hype of doom and gloom. Every month we offer educational classes to help you understand what’s really important in investing. Our ultimate goal is to guide you along the road to true investing peace of mind.
Call us to find out when the next investor coaching session is and reserve your seat.

How to Prepare your Portfolio for the Unknown

Unless you’ve been living under a rock since New Year’s Day, you should be well aware of the

tumultuous events that have been taking place around the world – the disaster in Japan and the

uproar in the Middle East and North Africa are just a few global measures that are causing

economic changes around the globe. We’ve seen gas prices soar and a rise in food and beverage

commodities, but the place in which these changes are especially apparent is the stock market.

Inflation has caused investors to shift their assets and determine which of the world’s financial

markets are being hit the hardest with higher interest rates and a rise in inflation. If you have any

game pieces playing in the stock market you’ll surely want to know which markets are being

affected by the ever-changing economic fundamentals. Let’s discuss the possible risks that your

portfolio faces, and aim to strengthen any weak spots.First off, let’s discuss the risks you must

consider – inflation and interest rates. These are two of the biggest factors to put into perspective

when considering stock market choices. Currently, higher energy and commodity costs are

sticking it to both consumers and producers. However, the big question that investors need to

mull over is how much of these high prices are due to speculation. Instead of looking at

speculations in the stock market, it’s crucial to consider supply and demand realties, and how

they will subsequently affect inflation, and in turn interest rates. Possible solutions to market

volatility and the risk of rising inflation and interest rates starts with broadly and efficiently

diversifying your portfolio. Here are some suggestions of market choices to invest in during this

time: U.S. and international stocks, commodities, inflation-protected bonds, real-estate

investment trusts and cash, all of which have the ability to withstand inflationary bouts.

Next, let’s discuss the risks you must anticipate – war, disasters, political and economical

upheaval and social unrest. While the stock market is extraordinarily resilient, and has been

fighting against all the shocks in 2011 so far with great momentum, it’s hard to say whether it

will continue to stand firm against the current troubles in the Middle East and Japan that are

disrupting the technology, automobile, and oil industry. Possible suggestions for anticipating

these risks include adding gold and other precious metals to your portfolio, as well as

implementing hedge-fund-like long-short strategies, which attempt to generate stock-market

returns, but with lower risk. Essentially, you bet that some investments will rise while others

will fall.

Of course, we must discuss the risks that never go away – markets and companies. Yes, market

risk is inescapable, but don’t view your portfolio like betting at a horse race – because the

favored winner may inevitably lose horribly. The key to market strategy is diversification and

implementing a safety margin. Keep these three risks that all investors should understand in

mind: valuation risk – overpaying for an asset, fundamental risk – buying something that turns out

to be flawed, and financing risk – using leverage. Other suggestions include avoiding

concentration in similar stocks and mutual funds, as well as never overlapping markets or

sectors.

Finally, a risk you must fear is that of playing it too safe. It’s a difficult balance to find – risk it

all and you could end up with too many losses, risk too little and you could be in danger of not

having enough money in later years, and of missing major market advances. Any suggestions

for not playing it safe simply revolve around going around your judgments and taking small risks

that yield small returns. Hopefully then you’ll start to feel more confident in your investing

strategy. Unless you can predict the future, it’s crucial to embark on a strategy that will preserve

capital in a period of heightened volatility. Simple steps like assessing risk, identifying

opportunities and looking past the present and into the future can shed light on how to handle the

markets twists and turns. And even though the future of the stock market can never be certain, at

least you can equip your portfolio with a nice safety net.