Crisis In Japan

What  Investors Need To Remember About The Crisis In Japan

                                                                            By: Brendan Magee, AIF

There is no doubt that when the world’s third largest economy experiences an earthquake and it’s on the verge of a nuclear disaster there will be a ripple effect on investors everywhere. For investors it will be difficult not to overcome by the hyped up doom and gloom being drummed up by all the media outlets.

So I thought it important to help investor focus on a view things that could prevent them from making impulse investment decisions as a result of the crisis in Japan.

First, through proper diversification you are prepared for these kinds of events. Think back to 9-11-01, the financial meltdown of 2008, or if you’re old enough the Kennedy assassination. These are events that have a few things in common. First of all they are so huge in nature that they could not be predicted in advance, and like Japan, you have no way of knowing how the world’s markets will react to them.   Proper diversification means that the different investments that make up your portfolio react differently as economic conditions and events occur.  In this case as Nikkei Index reportedly went down on the 15^th of March, U.S. Large co. Stocks were -1.17%. This obviously helps to offset the big losses.

Proper diversification helps to create opportunities to buy low/ sell high. When most people panic and sell stocks or markets that have gone down out of sheer panic, the prudent investor realizes that huge loss is an opportunity to buy stocks at a huge discount. Rather than run from down markets, perhaps we should learn to embrace bear markets as a tremendous opportunity.

Secondly, remember  markets are people. Human beings have a tremendous ability to pick up the pieces and rebuild. Remember some sixty years ago the majority of the world had been ravaged by war. Japan had two atomic bombs dropped on its country. With help, the world recovered. It rebuilt what had been blown to smitherines and it was built stronger than before. Japan will recover. Markets recover and they recover quickly. If you have stocks in Asia and Japanese markets, do not think that all is lost.

Lastly, in no way shape or form should you invest based on what you or your friends are reading or hearing from the media. The media’s interests are radically different from yours. They need to keep you tuned in, and they do that by pounding the air waves with doom, gloom, and tragedy. That agenda is completely at odds with yours as an investor. No doubt there are people in Japan who are experiencing terrible hardships and we pray that God provides them with the relief and care that they need and deserve, but what has been reported by the media what is predictable in what the media has reported has already been absorbed by the world’s capital markets.

It is only new and unknowable information that will move the world’s markets. Anyone telling you what to do with your money based on what has happened is preaching a message of gambling and speculation. For an investor this is the equivalent of radioactive waste. You can’t see it as it seeps into your investment decisions, but the impact of it is felt for a lifetime. You want nothing to do with it.

It is especially important in times of crisis to remember and adhere to the fundamentals of investing: Own equities, diversify, buy low/sell high. Stick to these principals and history shows us you will come out of this crisis better for having gone through it.

Brendan Magee is the president of Inevitable Wealth Coaching in Drexel Hill, Pa. With questions or comments call him at 610-446-4322 or e-mail him at Brendan@coachgee.com . You can follow him on the facebook at Facebook.com/Brendan Magee-investor coach. Tune into the Investor Coach’s radio show on am1340 WHAT every Sunday at 10:30am.

Charlie Sheen And Investors Need A "No"

Charlie Sheen & Investors Pay A Terrible Price For Not Being Told “No”

                                                                                    By: Brendan Magee

Charlie Sheen has lost a starring role on a t.v. show  that was paying him over a million dollars per episode. He’s done interviews and sounds nothing short of a blithering idiot, and has put his children in the care of an adult movie star. Charlie has reaped what Charlie has sown. You’d have to be woefully naïve to think that all this turmoil has been an overnight sensation. I would imagine that the trouble has been brewing for years. This is a guy that has to have been engaged in a whole lot of dysfunctional behavior for an awfully long time.

I can’t imagine that growing up the son of a wealthy Hollywood star or becoming a successful actor that Charlie Sheen has often heard the word no. I can’t imagine he’s been told, “not to do that,” by those who have depended on his talents to fill the movie theaters. I can’t imagine the night club owners where he hangs out told him to stop drinking. Make no mistake about it Charlie Sheen is responsible for what is taking place in his life right now, but I wonder how things would be going for him now if on a consistent basis when he was engaged in inappropriate or dysfunctional behavior someone told him to stop and he was forced to toe the line.  Would he and his family be paying the terrible price they’re paying now?

Like Charlie Sheen, investors who don’t hear the word “no” when needed pay a terrible price.  Investing is an instinctually and emotionally driven process. If the market goes up, we don’t want to miss the bull market, so we call up our broker and place the order to buy stocks. If the market is going down, we don’t want to get mauled by the bear market so we call our broker and place the order to sell. Now what’s probably more aggravating than seeing our portfolio go down in value is having our investment decisions questioned or being told by an advisor no “that behavior won’t be allowed.”  After all it’s our money and we worked hard for it. Who is anybody to tell us that our line of thinking is wrong?

Bear in mind that the last paragraph speaks to investors buying high selling low, and I know you’d never do that. However, think back to 2008. Did you sell any stocks after having seen your portfolio go down? Some $58 billion dollars came out of the market that year so investors had to have. Also ask yourself, now that we’ve seen two years growth in the market, are you considering putting money back in the market? If you answered yes to either of these questions two things are apparent. One you have a inborn tendency to break the golden rule of investing (buy low/sell high). Two, you are human and as any human being it is difficult to impossible to not engage in some form of dysfunctional behavior. We need help.

So, if as an investor, you realize that the biggest risk factor you face is your own humanity the last thing you are going to want your advisor to do is rubber stamp every investment decision you make. On the contrary, you are going to want that advisor protect your money from impulsive decisions that sound good in the moment and have lots of data to back them up, but in reality are completely in conflict with your financial security.  Like Charlie Sheen, investors can be blinded by their instincts and emotions. A sound investment strategy will often require an investor to do the exact opposite of what they see as the appropriate way to go. Often times the only thing that stands between them and disaster is someone strong enough to say “NO.”

Brendan Magee is the founder and president of Inevitable Wealth Coaching in Drexel Hill, Pa. With questions, comments, or suggestions call 610-446-4322 or e-mail Brendan@coachgee.com. Follow him on facebook at www.facebook/brendan magee-investor coach.