Bad financial decisions based on fear, greed
“Greed, like the love of comfort, is a kind of fear.”
— Cyril Connolly
It was a play call that will go down in infamy. The New England Patriots had the ball at their own 28 yard line. After a fourth quarter Colts touchdown, they still led by six points with only 2:08 left on the clock. Wisdom would say, “Protect your lead and let your defense win the game.” And although Patriots coach, Bill Belichick is famous for edgy, and some would say arrogant fourth down calls, no one expected he would take the risk in this situation. The reality was clear. The Patriots had control of the game in the final stages, but either the fear of Payton Manning or the comfort of Tom Brady caused the leader to make, what would later be seen by many, a season ending fourth down decision. With the game all but won, he made an irreversible decision based on fear or greed.
Money is a very emotional topic. It gets even more emotional when decisions must be made that put your money at risk. I meet with a large number of people who have a very real fear of investing because of past losses due to excessive risk taking or poor investment management. I also meet many, simply desiring comfort, who are just holding onto their current investments and really do not know how much risk they really should be taking with their money. They have no idea if their returns or losses are worth the risk that is being taken.
Maybe you find yourself in a similar position. You have had a great season and find yourself in a position to finish strong. But either the fear of past experiences or too much comfort in the status quo is clouding your vision. Maybe your fear has you fleeing to money market funds and bank CD’s, or your comfort has you holding onto the 1980’s “buy and hold” mentality.
The real question is: Do you know how much risk you SHOULD be taking?
Reality Check: The market today is very different than it was in the 1980’s or even 10 years ago. The idea of “hanging in there” is ridiculous for those at or near retirement … And frankly, even for those still saving for retirement.
If your “gut” is telling you that something is out of line, listen to it. Take a real inventory of your emotions and see if you find fear or greed. If you do, some issues probably need addressed. If you are pleased with the results of your game plan over the last decade, stick with it.
Real advice for Real people: Don’t go for it on 4th down, especially late in the game, unless you need to. Take the profits you have in your pocket and let your defense take care of the next drive. Unless you have more money than you can handle, stuffing all your money under your mattress is probably not the right choice, but knowing the amount of risk you can manage and taking measured risks to accomplish all your financial goals is a reasonable call. If you are experiencing the feelings of fear or greed, consider consulting a Certified Financial Planner ™ to help you formulate your play calls without the game ending drama.
RC Arseneau is a Certified Financial Planner and lives with his family in Delaware. Please submit any questions or topic requests to AskRc@mail.com.
The information and opinions in this column are provided only for educational and entertainment purposes. Any reference to a financial product or strategy is not to be considered an endorsement or recommendation. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional financial, legal or tax advice. Investment Performance may vary due to timing and expenses. Rc recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances.