How to Take the Stress out of Investing, Know the 4 P’s!

by Drew Snider, CFP®

Director, Financial Planning, Coastal Credit Union, Financial Advisor, CUSO Financial Services, L.P.

Member Tips

For a lot of people, investing can be a stressful experience. And this stress often causes investors to make poor investment decisions or to not even bother participating in the stock market. But investing doesn’t need to be stressful. Let’s discuss some of the primary investment worries you may be facing and some simple steps you can take to stop stressing.

What’s Stressing You Out?

The most common concern when investing is the risk you could lose the hard-earned money you put in your investment. Everyone gets nervous when the market becomes volatile and drops suddenly. It’s how you react that will have a huge impact on your ability to reach your goals of retirement, college for your kids or a second home. It can be stressful to know how much to save for these goals and what is the best account to get you across the finish line. For example, using a 529 college savings plan that has tax advantages if used for higher education expenses can help you save more for your college goal.

Maybe you find it stressful figuring out how to get started…What type of account should I open? Which investment firm should I use? What investments should I buy? These are all valid and common questions. Once you get over the “getting started” hurdle and get the account opened, many investors enjoy managing their portfolios. Or, you may find comfort in working with an advisor you trust to help open the right account – partnering with you to decide what investments to buy.

Gold, Cryptocurrency, marijuana stocks, clean energy stocks – there is always a “hot” investment your friends discuss at parties or work. It’s easy to get swept up in the excitement of an investment that is trendy but is it right for you? How much risk exists in your investment? Is it a good time to buy the investment or does it have the potential for growth? Does it fit my investment timeframe? Some investments need to be held for several years before they are available without fees or penalties. Be sure you know the liquidity specifics (how easy is it to turn into cash) for the investment.

Forget the Benjamins, It’s all about the P’s

To help take the stress out of investing, consider mastering the four 4 P’s – Plan, Patience, Persistence and Performance.

Plan - Having a financial plan in place will help you clarify your goals and estimate how much you should be saving to achieve them. It also helps you determine what rate of return your investments need to earn to reach your goals. Many investors who are planning for retirement take more risk than is necessary. In some cases, trying to maximize your returns with too much risk, can actually delay your retirement if your investments suddenly became volatile and lose value.

Patience – The amount of time you hold an investment is more important than timing the market. Using the information from the JP Morgan Guides to the Markets (Time, diversification, and the volatility of returns), we can see that the risk of losing money decreases the longer you hold the portfolio. More information from JP Morgan (Annual returns and Intra-year declines) demonstrates that even in years when the S&P 500 had a string return, it was in negative territory at some point

Persistence –Throughout your investing life you’ll be tempted to stop investing because you become nervous with the market or cash flow becomes tight. Don’t do it! Persistent investors stay invested through market turbulence and do their best to keep saving for their goals. When money gets tight try to reduce your savings rate rather than stop all together. Looking at the JP Morgan Guide to Retirement (Impact of being out of the market), we can see the effect on your portfolio is significant if you miss 20 or more of the best days for the stock market.

Performance – It’s important to monitor your portfolio’s performance for a couple reasons. First, the rate of return you’re earning helps you achieve the goals of your financial plan. If your portfolio consistently under-performs the assumed rate of return in your plan, you run the risk of not reaching your goals. Second, reviewing the performance of the individual investments in your diversified portfolio is vital to ensure they are helping you achieve your goals. As you review your investments, be sure to compare them to a similar option or index.

Considering an Investment Plan? Let’s talk.

We’re here to help you develop your investment plan and stay on track to reach your goals. As a Coastal member, you can connect with one of our CFS* Financial Advisors to schedule your free retirement plan review. We can assess your current retirement income strategies to see if you are on track to meeting your financial goals…without all the stress.

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© 2021 Broadridge Investor Communication Solutions, Inc.

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Coastal Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

Trust services available through MEMBERS Trust Company. CFS and Coastal Credit Union are not affiliated with Members Trust Company.