How to Protect Your Money from a Market Crash

How to Protect Your Money from a Market Crash

Market crashes are inevitable. Just as they happened in the past, they are also likely to occur again in the future. So what should you do to protect yourself from a volatile market? Chess strategy can help you deal with volatile markets The following anecdote, from the world of chess, provides an insight on how to deal with a bad situation (like a market crash) when it occurs: In November 1986, the World Chess Federation (FIDE) decided to intervene in the chess rating system. In an unprecedented event, they granted all woman chess players 100 extra bonus points – except for Susan Polgar. They claimed that since she competed mainly against men, she did not need the extra points. Besides the unfairness and humiliation that it caused, FIDE’s decision hurt Susan’s ranking and she was displaced from the top of the list of world-class chess players. But instead of giving up, Susan continued to work hard to regain her top position. She earned her Grandmaster title and became the world champion. Susan’s sudden and unexpected loss of her rating could be compared to a stock market crash, which can also be unpredictable and sudden. If your stock portfolio takes a dive, it is important to hold onto your stocks if the fundamentals are still sound. The moral of both Susan’s story and how to react to a downward trend in the market is the same: bad things will happen, but if you give into despair it will be difficult to get back on course again. Is there anything you can do before the market crashes? While moving on and... Click for more
Why Time Pressure Can Cost You a Fortune

Why Time Pressure Can Cost You a Fortune

Grandmaster Garry Kasparov gave Grandmaster Susan Polgar’s chess team a good tip for dealing with time pressure when he told them, “Always keep ten extra minutes on the clock, or you will end up making rushed decisions.” When you feel pressured by time, it’s easy to make a move that you may later regret. Time pressure can make you feel cornered and desperate, and you may end up moving randomly, feeling accomplished as long as you did something. Take time to make balanced decisions The effects of time pressure are not only felt on the chessboard, but can also be felt in your financial life. For example, pressure to buy/sell a particular investment immediately so you “don’t miss out on a great opportunity” may cause you to act without thinking. Before you make any financial move, you must decide if it is really the best move for you at this time. Tips for minimizing time pressure You can limit time pressure in your financial life by using time more effectively. Save time by paying your bills online or through an automatic payment system. Automate your savings so that you always pay yourself first. This way, you know that it’s done. Organize your time so that you use it productively. Unlike your investments, if you lose time, you can’t make it back. Create a daily calendar, scheduling your tasks to make sure you accomplish the most important things first. When you build your plan, remember to add those ten extra minutes to cover the unexpected things that may cause you to make a rushed decision (remember Kasparov’s advice above?). Efficiency,... Click for more
Why Now is a Good Time to Review Your Finances

Why Now is a Good Time to Review Your Finances

When did you last review your finances? I’m not referring to checking to see how much cash is in your wallet, but a comprehensive review including your retirement plan, investments, and bank statements. Just like a chess player constantly reviews tactics and strategies in hopes of improving his game, it’s important to review your financial situation on a regular basis to improve your investment performance. By keeping up to date with what’s going on with your money, you can make real-time adjustments as the market and your personal circumstances change. One of my most popular blogposts, “Why You Need to Review Your Financial Plan”, discusses the importance of regular financial reviews. This blogpost is still as relevant today as when it was just published. Click here to read it and find out why conducting a financial review on a regular basis is so important!   Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of Investing, is an avid chess fan, international investment advisor and Certified Financial Planner (CFP®).... Click for more
This is Why Your Child Can Learn to be a Strong Chess Player and a Great Investor

This is Why Your Child Can Learn to be a Strong Chess Player and a Great Investor

Some of the world’s best chess players learned how to play when they were very young. The youngest person so far to become a grandmaster is Sergey Karjakin of Ukraine, who won the title at the age of 12 in 2002. In the same way that your child can become a good chess player if he learns the game at a young age, he can also become good at investing and managing his money if he begins learning basic financial concepts when he is very small. Why? What makes a child a strong chess player? You don’t have to be a genius to learn to play chess. Anyone with enough practice and skills can learn to play a good game of chess. However, a young child can absorb the necessary techniques and skills quicker than someone older, whose habits and mindset are already ingrained. Children may also be more enthusiastic about challenges and winning games than adults, giving them the push to learn more. If you give your child chess instruction at a very young age, what will happen? If he enjoys playing chess and develops his abilities, he may become a chess grandmaster. But even if he doesn’t play in chess tournaments or win any prizes, he will develop strategic thinking skills that will benefit him later on in life, whether in the classroom, at work, or in his personal life. The same idea applies to finance In the same way that a child can pick up chess skills more easily than an older person, it is easier to learn positive financial habits when still young rather than... Click for more
Here are the Steps to Success in Chess and Investing

Here are the Steps to Success in Chess and Investing

When you play chess, you need to take small steps to success rather than making grandiose moves or waiting for your opponent’s blatant blunders. A good chess player builds his defensive and offensive fortress slowly, accumulating small advantages wherever possible. The same idea applies to finance. Since it’s unlikely that you will win enough money in the lottery to support you forever, you’ll need to accrue money in reasonable, steady amounts. Over time, a collection of seemingly trivial sums adds up. The book Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing suggests the following small steps to help you build your nest egg. (To watch a 3-minute video about this, click here.): Regular savings. Squirrel away $5 per day, and put it into a stock mutual fund monthly or quarterly over twenty years. If you net 6% per year on that pool of money, you’ll end up with over $67,000. (If you can save even more, great!) Lower fees and expenses. Look for ways to reduce small, recurring cash outlays. You could transfer your banking relationship to a lower-priced firm (saving $400 per year), pay off your credit card every month (or better yet, switch to a debit card) and save $2,000 per year in interest payments, and renegotiate your cable and cell phone bills (save $30 per month). Examine your budget to find other possible savings routes. Implementing these alone would allow you to sock away $3,800 every year. Get a better salary or find a second income. Could you find a job with a better salary, or perhaps work... Click for more