I often receive emails from investors expressing a mixture of confusion and panic. That confusion can come in several forms:
- “My portfolio isn’t doing nearly as well as I’d hoped. What am I doing wrong?”
- “I just started to learn about investing, and I’m lost! Help!”
- “I read previously that I should invest by doing X, but now I’m reading that I should be doing Y instead. Who should I believe? What should I do?”
Step 1: Do Nothing.
I’ve written before about my version of the 30-day rule:
Every time you’re tempted to adjust your portfolio in some way, don’t. Instead, write down your idea, your reasoning behind it, and the date. 30 days later, if the reasoning still makes sense, then (perhaps) give it a go.
I still think that’s a good idea. Even if you’re in a truly dire situation, making major investment decisions a) while you’re panicked or b) before you’ve fully researched all your options is unlikely to work out well.
Step 2: Consider Both Sides.
One of the reasons investors get so confused is that the people giving investment advice all seem to disagree with each other.
For example, my friend Neal is a CFP with more than 20 years of experience, and I have no doubt that he intends the very best for his clients. Yet he and I disagree adamantly on some investment topics:
- I think index funds and ETFs are hands-down the best way to own stocks. Neal isn’t convinced.
- I think single premium immediate annuities are a helpful tool for retirement planning. Neal thinks they’re primarily designed to enrich insurance companies.
So here’s a person with credentials, experience, and ethics recommending a very different approach to investing than what I’d recommend.
If we then consider the fact that there are many people/parties in the investment services industry who don’t have your best interests in mind, it’s no surprise that you see conflicting advice everywhere you turn.
But that doesn’t have to be a problem. If you take your time and research both sides of an issue, you’ll be able to decide for yourself who presents a more compelling argument. For example:
- Can’t decide whether picking stocks is a good idea? Read How to Make Money in Stocks, then read The Investor’s Manifesto.
- Can’t decide whether you want a stock-heavy allocation or a bond-heavy one? Read Stocks for the Long Run, then read Worry-Free Investing.
- Can’t decide about active funds vs. index funds? Read Fund Spy and The Little Book of Common Sense Investing.