The Stanly News and Press (Albemarle, NC)

Opinion & Letters to the Editor

March 4, 2013

Investing in turblent times

Monday, March 4, 2013 — Confused about what to invest in today? Join the club. The stock market has made up most of what it lost during the recession, but some say it’s gone too high. Gold is down from its peak, yet worries about inflation may push it back up. Real estate appears to be coming back, but for how long? Safe investments, like certificates of deposit and government bonds, are available but are paying near-historic low rates.

So there’s uncertainty and worries in the investment world. This isn’t new. There are always worries, confusion and unpredictability with investing. Investing deals with the future and, of course, no one can perfectly foresee what’s ahead.

What’s an investor to do? Fortunately, there are some traditional investment rules that I believe still apply to today’s turbulent times. There’s no guarantee that following them will make you rich, but I’m hopeful they will prevent you from making some big mistakes.

Here are my top five rules.

Risk and return move together: One of the most frequently asked questions in my 35-year career has been, “Where can I invest my money to get higher earnings yet take no risk?” My answer is always short – nowhere. One of the basic rules of investing is that risk and return move together. To get a higher return on your money, you must take more risk. And to have less chance of losing some or all of your money, you have to accept a lower return.

This relationship should make sense. The only way someone will expose their hard-earned invested money to more risk is with the expectation – if things work out – of earning more on that money.

Most experts say some risky ventures should be part of any investment portfolio. But investors should know the level of risk they’re taking. Also, investors shouldn’t think they can have the free lunch of low risk and high returns.

Learn, and only then, leap: I can remember my late mom and dad sitting around the kitchen table 50 years ago and listening to someone making pitches for investments. My parents never went to college – indeed, neither finished high school – and while intelligent, they simply didn’t understand the terminology or ideas of investing. I know they had no clue as to what the salesperson was saying.

Any investment worthy of consideration should and can be presented and explained to you in an easily-understood fashion with a minimum of jargon and complications. And if it can’t be explained to your satisfaction, then you should walk away. For any investment, you need to know exactly how your money will be working, what can go right and what can go wrong. Don’t let someone wave their hands and say, “It’s complicated, but it will work out – trust me.” That’s not good enough.

Find fees: Investment managers and companies have to earn money. So somehow they will be compensated. That’s understandable. But before you put your money in any investment, find out exactly how the compensation occurs. Sometimes it will be when you initially invest the money, sometimes when you withdraw the money, sometimes while the investment is working and sometimes a combination of the three. The point is, know how you pay and what you pay.

Decide to diversify: A traditional way of dealing with risk – as well as with the reality that knowing which investments will do best in the future is difficult – is diversification. Diversification means putting your investments eggs into many baskets. How many baskets?

Experts say to consider stocks, inflation hedges like gold and real estate, short-term “cash” investments such as money market funds and long-term bonds paying a fixed interest rate. Mutual funds are a great way to access most of these baskets.

Timing is tough: Most investors have dreams of timing their investments, meaning moving money in just as the investment is ready to take off, then moving money out prior to a drop or crash. It’s good to have dreams, but this is one that is very, very difficult to achieve. Many have tried – and may succeed for a while – but eventually the odds catch up to them.


Text Only
Opinion & Letters to the Editor
  • taylor.armerding.jpg Obama's equal pay exaggeration leads us all into danger

    The president's claims of national shame over gender-based pay inequity spring from distorted calculations, as well as some convenient political math.

    April 12, 2014 1 Photo

  • Teens trading naked selfies for mugshots

    Will teenagers ever learn? You think yours will. Maybe so. But it's likely that was also the hope of the parents of children who were so shamed by nude photos of themselves that went south - how else can they go - that they killed themselves.

    April 12, 2014

  • Brent Laurenz If you want to vote in primary, you need to register to vote now

    RALEIGH – North Carolina voters will head to the polls on May 6 this year to cast ballots in important primary elections across the state.

    April 11, 2014 1 Photo

  • Scott Mooneyham Heeding the voter fraud call in N.C.

    RALEIGH – Legislators found the findings outrageous.

    April 11, 2014 1 Photo

  • Doug Creamer Roots

    I took a few minutes over the weekend to enjoy our yard and the arrival of spring. There seems to be so much work that needs to be done, it is hard to decide what to do first. I am excited that I got to run my tiller through the garden. I didn’t go very deep, but I did at least break up the soil. I have a couple of raised beds and the soil in them was in very good shape. I didn’t plant my peas and now after the big rain we got on Monday I realize that I missed a window of opportunity.

    April 11, 2014 1 Photo

  • 10 tips for surviving a severe allergy season

    My colleague Brady Dennis reported recently that the arrival of warmer weather will soon unleash a pollen tsunami in parts of the country where the winter has been especially long and cold. Here are some survival tips from Clifford W. Bassett, an allergy specialist and assistant clinical professor of medicine at the New York University School of Medicine.

    April 11, 2014

  • Is a paleo vegetarian diet possible?

    Research shows most people can follow a regimented eating plan for a short time. That's not the challenge. The challenge is finding a healthful eating plan you can follow day after day and achieve your long-term health goals. At this point, it doesn't appear that the paleo eating plan meets these objectives for most people.

    April 10, 2014

  • Screen Shot 2014-04-08 at 2.16.35 PM.png Are Americans smart to stop drinking diet sodas?

    Recent data from Beverage Digest suggest many are cutting back on diet sodas. Consumption of diet sodas fell more than that of sugary sodas in 2013. This raises two questions: Why is total consumption declining, and is drinking diet soda harmful to health?

    April 10, 2014 1 Photo

  • To get quality care, it helps to be the right kind of patient

    I am a family physician. Sometimes I must step out of the comfort of my clinical role and into that of patient or family caregiver. Generally, these trips to the other side of the exam table inspire a fair amount of anxiety.

    April 10, 2014

  • Hospice of Stanly County should be the one we support

    Regarding your recent article about Community Hospice relocating its offices from one location in Troy to another, let me point out a few things.

    April 10, 2014

House Ads
Seasonal Content