No, I am not "hooked on phonics."
Actually, "Phool" is an actual word created by Nobel Economics Prize winners George Akerlof and Robert Shiller to describe a person who succumbs to "phishing."
So, what is "phishing"?
Think financial ploys used to deceive investors and get into their wallets.
These concerns were the subject of a recent Forbes article titled "One Powerful Money-Making Move for 2016."
According to the article, when it comes to money matters most of us shoot ourselves in the foot.
Experts Akerlof and Shiller point out that self-conceit (that we think we know more than all of the smart people who are trying to take our money every day) is at the heart of phoolish thinking and behavior.
I mean, can you really compete with computers and sophisticated programs that take advantage of pricing glitches and make trades in milliseconds. What about the robots that move at the speed of light?
Nevertheless, we can choose not to be a phool.
The article offers the following practical points to ponder in that regard:
Adopt a Long-Term Investment Strategy.
Avert your eyes from financial headlines touting a particular stock or financial product.
Why?
If others think the stock or product is a hot buy, then it likely is overpriced ... or will be by the time you get around to buying it.
Remember the laws of (financial) physics. It will eventually come down in price.
Better yet, determine what you want to do with your money in terms of decades. Is paying for college, retirement planning or estate planning in your windshield still?
Buy and Hold.
Albeit this time tested approach is not as glamorous as day trading, you are not competing in the market with thousands of professionals with better information and tools than you have at your disposal.
If you need stocks for growth, examine the associated risk and adjust your portfolio accordingly.
Select Index Funds.
Since you cannot buy last year's returns, consider index funds covering global stocks, bonds, and real estate.
Check them once a year. [Do not keep pulling up the "plants" to check on the progress of their "roots"!]
On the other hand, if you get an upset stomach when you look at the risk you are taking with such funds, then make a change (only do so annually).
When you get right down to it, you need not have a Nobel Prize on your mantle when it comes to prudently managing your own money.
Maybe you do not know as much as you should (or could), but that is okay.
Stay calm and stay the course.
Better yet, contact an experienced financial advisor to help you create a comprehensive financial plan, fund that plan and monitor that plan.
If you do not have a trusted financial advisor, then ask your estate planning attorney for his or her recommendation.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: Forbes (December 28, 2015) "One Powerful Money-Making Move for 2016"
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