INVEST LIKE A PROFESSIONAL

When I was learning to fly, a client who was a retired air force pilot told me he was selling his airplane. He was sad about it because he loved to fly and his family loved flying with him. When I asked the reason he said that he was no longer able to commit to the level of professionalism in training that safe flight required. “Flying is for professionals” he said, “and when the day comes that you are no longer willing or able to act like one, it’s time to turn in your wings.” I promised him that I would remember and one day follow his example. I have never been a professional pilot, but I have always acted like one.
 
Like flying, there are also principles that govern the management of money that should be adhered to regardless of your situation in life.  I teach young married couples to live within their means, avoid unnecessary debt and spend money wisely and many are very committed to doing just that. Like professionals they set up budgets, shop sales, and live within their means. Unfortunately, as income levels increase and money begins to flow more freely, too many begin to abandon the principles they once lived by and get careless with their money. This often results in learning the hard lesson that there is no amount of money that can’t be spent if it is not managed properly.
 
Investors likewise are subject to the temptation to deviate from principles of investing they have learned and once lived by. In 2008 many abandoned their financial plans and sold out at perhaps the worst possible time. Professionalism turned into fear which ultimately led many to make mistakes which in some instances cost more than the temporary market losses they were afraid of. Professionals are human too, but they temper fear with knowledge and discipline.
 
Now in 2018 we face an opposite situation. I have had investors in their 70’s and 80’s ask about aggressive investments they would have never considered when they were younger. It’s been 10 years since the last crash and maybe they have forgotten what a down market feels like. It may not help that according to FINRA, over 60% of currently registered financial advisors were licensed after 2007, meaning the next market crash will be their first as advisors.
 
I am certainly not predicting a market crash, but I am confident one will come eventually and wish to offer the same advice my pilot friend gave me. Investing is for professionals and all investors should act like one.  Establish investing principles that are suitable for your situation and commit to living by them. Do not make emotional decisions that violate those principles regardless of the current economic situation. These are great times for investors, but also important times to remember that whether you are a professional investor or not, you should always act like one. Your financial survival may depend on it.