What is your Investing Style


I am thousands of miles away from my family—they are in Arizona and Florida, and I am in the Midwest. The holidays can be difficult but, thanks to FaceTime, I can watch them opening presents, baking and decorating cookies, playing with their pets, and eating a holiday meal. We can sing carols together and I can wish each of the six family members with birthdays in December a “Happy Birthday!”

Opening presents is especially fun to watch as the kids rip the paper off the present and exclaim that it is the best ever and just what they wanted, only to go on to the next one and exclaim it all over again. It makes me laugh! They are so excited and can not wait to try each gift. They go from one to the other and then back again. Sometimes one wishes he/she received a gift that another one got and at other times a gift is put aside because it needs some setup. Help mom and dad!

As I thought about this more, I realized that investing, for some people, is the same.

One Investing Style

When you invest do you jump from one thing to another? Does the “package” lose its luster easily if there is no immediate gain? Do you wish that you invested like your neighbor who brags about his or her profit? Do you read an article or hear news about a company that shows promise and jump to be its “groupie”? When you realize that the gain you thought would be imminent is not materializing, do you sell and move on to the next idea? How long do you wait for it to produce results? If you realize that a little more homework is necessary to understand an investment, do you give up because investing should be easy?

It is sometimes difficult to know how to invest. There are so many people—celebrities, financial gurus, educators, researchers, news writers, and even neighbors and friends—who share their ideas imbued with a sense of urgency. Buy (rarely sell) now or you will lose a great opportunity—a chance to make millions! The Wolf of Wall Street depicts a real-life financier who began his career selling penny stocks and eventually worked his way into the upper echelons of Wall Street. The key word to all of these is SELLING—is it a hype or a tried-and-true method? How do you know?

It is tempting to follow the lead of someone who has been successful (or says they have been successful) but you can’t afford to view with the eyes of a child. Unfortunately, in our world even news is entertainment. The days of merely reporting are over and that makes financial decisions more difficult.

Another Style of Investing

The first thing an adult does when investing is set reasonable expectations based on reality. There are questions to answer before you start investing—are you covering your living expenses, is debt under control, and do you have an emergency fund established? If the answer to all those questions is “yes”, then full speed ahead!

Why are you investing? Remember, investing is meant for long-term goals, those longer than five years. Goals were discussed in my blog, Set Your Investment GPS.  Once you have clear long-term goals set, the reason(s) that you are setting aside money, then you can open an account, or use your company retirement plan, and start putting money aside regularly.

You and your family situation are one-of-a-kind. Your reasons for saving and investing are unique to you. No one is the same age with the same lifestyle, income, expenses, family circumstances, and tastes as you. Your priorities are different. Especially in the world of investing, it is tempting to compare notes with a friend or family member or listen to a celebrity. I urge you to honor your unique needs and goals and save and invest accordingly.  

How do you choose what to buy in your accounts? My blogs, The Key to Investing-Know Yourself and Investment Chili, will give you a start. The first addresses your unique risk tolerance and risk capacity. Knowing what risk tolerance is right for you is THE MOST IMPORTANT determinant of successful investing. If you invest to match your risk tolerance, you are less likely to panic and sell in a down market. The second blog explains how a mix of stocks, bonds, and cash make the best “tasting” portfolio. Your risk tolerance will lead you to the right mix for your taste.

After you assess your risk tolerance and know the correct mix of stocks, bonds, and cash that matches that risk tolerance, it is time to pick individual investments. For beginners, I suggest using mutual funds or exchange-traded-funds for diversification, which reduces risk. If your whole portfolio is composed of one or two stocks, your future rides totally on the performance of those two companies. What if you are wrong? How will you monitor your stocks and how much time can, and will you devote to keeping track of them? If you want some help with your decision, my future blogs will talk about product choices for both saving and investing, and will also talk about risk, so keep tuned.

In any case, to have the best chance to meet the investment goals that you set, your choices need “time in the market”. My blog, Rest is Productive, Even for Your Investments, provided evidence that the possibility of a positive outcome for your portfolio increases with time. Due to market volatility, which has increased for both stocks and bonds, it is important to have long-term vision. That does not mean that you keep all the same investments in place the whole time. A rebalance and performance review should be on your calendar at least annually.

A Mix

So, you know that your best opportunity for growth is to invest for the long-term, but you think it might be fun to try your hand at trading stock or buying what your neighbor is hyping. What should you do? How about setting aside a portion of your investable dollars for a little experimenting, while the bulk is left alone and well diversified? How you choose to experiment is up to you. From time to time, I choose a few stocks that I think will do well based on consumer choices or, in the past, based on a hobby or sport. That part of my portfolio is a very small percentage of the total, however, because I am not ready to risk my retirement. Make sense? How big should that percentage be? Although unlikely, I only “trade” what I am willing to lose. For me, that is not a big number.

What If You Want Help?

If you don’t have time to spend on selecting investments or don’t have the desire to do it, that is ok. There are great resources for help. If you want investment advice that is specific to your situation, please look for an advisor who is a fiduciary. That is not a universal requirement in the industry.

The definition of a fiduciary is: A person or company who holds a legal or ethical relationship of good faith and trust with a beneficiary—a person, or group of people—putting the beneficiaries’ interests ahead of their own. A fiduciary prudently takes care of money or other assets. A fiduciary could be a corporate trust company or department, a financial advisor or financial planner, or managers of pension plans and endowments. Fiduciaries are regulated under various statutes and laws.

Being a fiduciary is the highest legal duty of one party to another. It is a higher standard of care. How do you find an advisor who is a fiduciary? Look for a Registered Investment Advisor (RIA) or a CERTIFIED FINANCIAL PLANNER™ professional. You can search for an advisor in your area who is a CFP® professional at the following website: letsmakeaplan.org.

You can find more tips on my blog. Sign up to receive an email each week and submit a topic that you would like covered. If you have a question about something I wrote, please ask! That is the best way to learn.

Thanks, until next week,

Bev Bowers, CFP®


Legal Notice: This document is intended to be informational only. Beverly Bowers does not render legal, accounting, or tax advice. Please consult the appropriate legal, accounting, or tax advisor if you require such advice. The opinions expressed in this report are subject to change without notice. The information in this report is from sources believed to be reliable but are not guaranteed to be accurate or complete. All publication rights reserved. Use of this material is subject to the Copyright restrictions described on BevBowers.com.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark and the CERTIFIED FINANCIAL PLANNER™ certification mark in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.