We all want confidence. How do we get it? Pt 2
Last week, we summarized a New York Life wealth survey and noted the stark contrast between participant’s confidence in managing day to day financial choices and wealth building, investing and planning for the future. Today’s blog will continue with the last two components – accuracy & control and outside elements.
Accuracy and control
Short term – Creating a goal and calculating what is needed for the immediate future is easier to determine - $10,000 in 18 mos. to 2 years. Adjustments can be made early to course correct without major impact. Confidence grows because the calculation is less complicated.
Long term – there is a considerable amount of time between financial decisions and end results. In that time, the investment can either lag behind or exceed projections. If the investment is managed, you trust the expertise of the fund manager to mix the investment properly for the optimal return. If it is a passive investment (i.e. ETF or index fund), you trust that the market will correct and recover from any downturns. How accurate were the projections because much of it is out of your control. Confidence decreases as the investor loses control of the results and time horizons impact the accuracy of the projections.
Strategy to consider – List three types of investments you want to learn about. Gold, cryptocurrency, mutual funds, ETF, IRA, etc. Contact a financial professional and ask questions related to the investment types. FINRA.org has a search tool for locating and researching broker and brokerage firm credentials and history. Keep the discussion to education and learning. Do not invest if you don’t understand or can’t clearly tell another person about the investment.
Outside elements
Short term – price fluctuations of gas and groceries is manageable. You determine what will be purchased and when. Confidence increases because the financial impact is understood, and alternatives are clear.
Long term – changes in domestic and global markets impact productivity and return on investments. Particularly if a portion of your investment includes foreign companies and currencies. Confidence decreases because terminology is complex and market variances don’t similarly impact all investments.
Strategy to consider – Identify 2 – 3 external factors that could impact an investment to grow, stay flat or decrease? Inflation, recession, expansion, gross domestic product (GDP), emerging technologies, or monetary policies. When you hear or read these phrases more regularly, it reduces anxiety because you are learning the sensitivities of market cycles.
Be assured that you can grow and develop confidence in planning and understanding long-term financial concepts. The tools and resources are available. Start learning where to look. The goal is to make crossing the gap using steps of knowledge, rather than a leap with a holey parachute.
Confidence grows and anxiety dwindles as we gain knowledge. Think about the 50% uncomfortable, 70% incremental and 100% vital. StudioM Financial is here to assist. We encourage you to connect with us and schedule a 30 minute consultation. Until we meet…keep working in the change.