Is It OK to Invest Conservatively?

 In Advisers, Asset Allocation, Expectations, Financial Planning, Forecasts, Future, Goals, Happiness, Investments, Motivation, Past, Retirees, Retirement, Risk

Yes it is!  So there.  I don’t care if the overwhelming wisdom in the financial services industry is that when you invest for your future, for the long run, you have to have a portion of your investment in the stock market.

I met with a client late last year and she has always been a conservative investor and does not want to invest in stock market type investments.  She is in her early fifties.  She is, quite simply, not comfortable with anything that might fluctuate.  She asked me if this was ok.  She was concerned that she wasn’t doing the right thing.  I explained to her the pros and cons of her approach and the risks that all investors face.  We went over a few scenarios showing how she could end up having more in her account if she was more aggressive.  I also told her that if she invests in the stock markets, even using very low-cost, well-diversified funds from Vanguard, she would still be subject to potential loss.  I made it clear that regardless of what has happened in the past, no one can give her any guarantee on what will happen to her funds.  (Unless they want to sell her a variable annuity!)

As we discussed this, it was clear to me that she simply does not want to be invested in anything that would fluctuate.  While she is not all that pleased with earning a little under 2% that her stable value fund is currently paying, she did not want to participate in the stock markets.  BTW, she has a degree and is a long-term professional.  Over the years in my role as an advisor, I have met many people like this.  They are not fools or uneducated.  They simply have a very good sense of what makes them comfortable with their money. Most are good savers and have their spending under control.

Invest in what you understand and can tolerate.  And it is ok to go against the prevailing wisdom if you understand the trade-offs.  Don’t get talked into investments that won’t work for you or that will derail your savings efforts.  The best plan is the one that works for you and your Family!



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