Fear still here?

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A few days ago, Investment News had the following headline,

Headline on June 15, 2009

Headline on June 15, 2009

Click here for full article.

Barclay Wealth, a division of Barclays Capital based in London recently completed a survey of 2,100 wealthy investors and found that although 88% believe that there are good investment opportunities available, 68% are not investing because “they believe the risks of further price declines is too high”.

This is worth repeating, 68% of “wealthy investors” are too fearful to invest in the markets. This group of investors has more experience investing than the average retail investor and many are very knowledgeable. But, they also have more to lose and most haven’t lived through a market like 2008 and 2009. In some ways, this confirms an April article also in Investment News that had the following headline,

A Lost Generation of Investors

A Lost Generation of Investors

Click here for the full article, A Lost Generation of Investors.

Over the course of my career, I have encountered many people who were not alive during the Great Depression but were still emotionally impacted by it. Having heard about it from their parents, they learned wealth destroying principles like, “Never buy Stock” or “If it’s not guaranteed, don’t buy it”. These investors zealously protected their principal, but unfortunately missed out on the tremendous growth of the stock market. They fell behind those that approached investing rationally.

Stock market investors understand that measuring returns over one year is far too short. Jim Cramer, of Mad Money, said last fall that you should pull your money out of the stock market if you need it within the next five years. He was criticized for saying this because he supposedly caused a panic. In reality, you shouldn’t invest in the market if you need the money within at least five years, preferably more like 10. There have been very few ten year periods in the US Stock Market’s history where the return was negative. There have been no fifteen year periods with a negative return. The shorter the time period, the more likely it is that you could experience a loss. Savvy investors remain invested regardless of market conditions, but they do not invest money that they may need in the short term.

Based on what we see happening today, investors may leave the market permanently and another generation may suffer as a result. The purpose of my book, Investiphobia, is to help prevent this from happening. It was written specifically to address the fears that become Investiphobia, a condition that paralyzes and prevents sound investment decisions. It really isn’t hard to invest successfully, but it is impossible if your fears prevent you from investing.

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