As I write this, sales of antacid are skyrocketing, therapists are booked ‘round the clock and financial advisers are hiring extra staff to field a torrent of phone calls.
Stress. Worry. Panic.
The stock market has been behaving like a teenager home alone for the first time with the parental liquor cabinet left unlocked. Binge and purge is the order of the day.
By the time you read this, volatility in the stock market may be over and your investments fully recovered from the 20 per cent drop that put the Canadian market in bear territory for the second time in less than five years. But I doubt it.
Being a glass half full kind of person, I’m going to use these days of crazy stock and currency markets to fullest advantage. There is no better time to raise your investor IQ than when times are bad and threatening to get worse.
The primary reason people are so fearful about saving in the form of investments is because we don’t have a good grasp of who we are as investors or a clear picture of our financial goals – let alone the path to reach them.
You probably wouldn’t bake a cake without a recipe or build a house without a blueprint, yet we often sail off into the financial future without a trace of a plan.
One reason so many people don’t create a financial plan, especially one for investments, is because they don’t know the steps to take. Your investing road map isn’t about understanding complex terms, reading corporate balance sheets or predicting which way the market winds will blow next. It’s about having a simple, comprehensible map.
Over the next few months, I will walk you step by step through the creation of an investment plan, which will allow you to evaluate the investments you choose or already hold. This information will serve you in good stead whether you manage your own affairs or work through an adviser.
The emphasis throughout will be on simplicity; most of our financial lives are far too complicated already! When times are turbulent, as they are now, the best defense is a simple yet comprehensive plan.
Next post: Who are you? Identifying your investor personality and situation is an important first task.