Along the same concept lines, I want to relate the fear of failing to investment management. The obvious connection is that without accumulating sufficient wealth, some of the dreams may not be possible. To look at it another way…how do you know how much money you need if you don’t know how to spend it (other than basic life costs)?
So where does human nature create the fear in investing? The obvious answer is in the “fear of loss”, but let’s dig a bit deeper. Consider that portfolio management is part art and part science, which means that no one gets it right all the time. Young investors adopt the “I am young and can afford to lose money, because I have time to make it back” philosophy. Sounds a little like the “no fear of failure” lesson of Ms. Blakely’s father (reference my last blog). As we age people move to a less risk oriented approach, because of a fear that time is no longer on their side.
If you consider that one of the top concerns, if not the top concern, of people heading into retirement is living too long, thus running out of money. It appears that the risk fear and the longevity fear are in conflict, and therefore potentially damaging to a personal investment strategy. With the potential to live 25-30 years in retirement, is the scenario described above helping investors make sound financial decisions
We use analytical tools to help us put emotions into numbers, to see if the income needs to manage the longevity risk match the emotionally fears of volatility in the stock market. In this way, we feel that we empower people to make better personal financial decisions.
Permission Granted – to revisit your portfolio management strategy to be sure that your risk tolerance, asset allocation and life goal expectations all align in a coordinated strategy. We believe that the most difficult challenge many of us will face, is figuring out how not to run out of money too soon.