by Doug Goldstein CFP® | May 22, 2018 | Decision Making, Financial Plan |
While a financial loss can be devastating, it doesn’t mean that your situation can’t be improved. Sometimes, your loss can even, ironically, spur you on towards future success. Imagine that you lost an important piece, such as a bishop, or even your queen, in a game of chess. You wouldn’t just get up and walk away from the chessboard. You would look at the way your pieces are set up and try to see where you went wrong. Perhaps you need to change your strategy or rearrange your pieces so that you can strengthen your defense. Losing an important piece doesn’t always mean the end of the game. If you regroup, you may still have a chance of winning. In this case, your loss may lead you to become a better player. Setbacks can be a stepping stone to success Remember the proverb, “If at first you don’t succeed, try, try again.” Some of the most famous investors and entrepreneurs followed this advice, and even though they initially failed in their efforts, their determination eventually led to success. For example, Col. Harland Sanders failed at several businesses before, at age 40, he began selling fried chicken at a gas station in Kentucky. He didn’t give up on his efforts to succeed in the food industry. This enterprise eventually became Kentucky Fried Chicken, one of the most famous fast-food chains in the world. You can still turn things around Don’t consider a monetary loss to be the end of your financial world. Use it as a chance to reassess the way you manage your finances and a springboard to becoming... Click for more
by Doug Goldstein CFP® | May 8, 2018 | Decision Making, Strategic Thinking |
If you want to be a successful investor, your first step is to create and follow realistic financial goals. Why is this important? When people invest without a particular goal in mind, their investments lack focus and they change strategies frequently. A clear goal keeps you on a definite path and you are less likely to get distracted. In defining your goals, don’t let your parents, boss, or friends dictate your direction. Think about your specific desire, write it down, and then figure out how to get there. Is your goal realistic? Once you’ve decided upon your goal, see if it is realistic. Here’s where it helps to get some outside advice, whether from a friend, family member, or professional advisor. For example, let’s say your goal is to retire at age 55 and you calculate that you’ll need $4 million in savings to achieve the lifestyle you want. You divide that amount of money by the number of years until your desired retirement age. But is this realistic? If you’re 51 today and you earn $100,000 per year, there is no way you can save $1 million a year for the next four years. On the other hand, if you’re 25 with a great income and you can figure out how to save $60,000 every year, you could very possibly reach your $4 million goal if you earn enough to meet your savings target and if you average a 5% return on your money over the next 30 years. Make sure you make a distinction between a realistic goal and a wish. What you can learn about goal-setting... Click for more
by Doug Goldstein CFP® | Mar 13, 2018 | Decision Making, Financial Plan |
While you don’t want to be a reckless investor, over-zealous attempts at risk avoidance can cause you to lose money. Here’s why. Imagine that your friend invites you to play a game of chess. She is a good chess player, and there is a possibility that she will win. However, there is also a chance that you will win. But you decide that as you don’t want to take the risk of getting beaten, you won’t play at all. What do you gain from this decision to avoid risk altogether? Well, you definitely won’t lose the game. No one will beat you, and you won’t feel a sense of defeat. But you won’t win either. You certainly avoided a potentially uncomfortable position and replaced it with a neutral position – yet in doing so, you gave up the possibility of a pleasant position. How do you know for sure that you will lose? Wouldn’t it be better to at least try? The definition of failure Famous chess grandmaster Garry Kasparov once said: “I think our chances are not looking great today, but the only way to fail for me is just not to try.” His quote does not apply only to the world of chess, but also relates to investing. There is no such thing as an investment that is completely risk free, and some people find this idea extremely frightening. Their fear of losing money, known as “loss aversion,” is great enough to cause them to make poor investment decisions or not to invest their funds at all. Rather than putting their money into something that could potentially... Click for more
by Doug Goldstein CFP® | Feb 27, 2018 | Chess Strategies, Decision Making |
While chess pundits may think attack is the best form of defense, is following an attack strategy the best way to protect your investments? Attack strategy on the chessboard To answer this question, let’s take a look at the famous 1851 “Immortal Game,” when Adolf Anderssen defeated Lionel Kieseritzky using a particularly aggressive strategy. Analysts of the game point out that almost every one of Anderssen’s moves either directly struck his opponent or prepared Anderssen for a later attack. His audacious sacrifices of his rooks, a bishop, and eventually his queen, set him up to checkmate Kieseritzky with just three minor pieces. But how far can you take this aggressive “attacking” approach in chess or investing? Not as far as you might like. While strong attacking moves can advance your position, they need to be tempered with serious thought. Chess enthusiasts refer to Mikhail Tal’s games. Tal is known for his combinations of daring sacrifices and tactical improvisations. Even though Tal’s aggressive play won him the nickname of “the magician from Riga,” he was only able to hold onto the title of world champion for one year. While aggressive techniques may win in the short term, can they sustain prolonged success? Think clearly In chess and investing, while it pays to focus on winning and to ignore the negative influences around you, you need to strike a balance between aggression and caution. Just as in today’s defensive realm of grandmaster chess it’s not clear that Tal’s approach would work well, so too in investments. Someone may tell you about a deal that caused him to profit, but investing history... Click for more
by Doug Goldstein CFP® | Dec 5, 2017 | Decision Making, Financial Plan |
Here’s an important financial tactic that is often overlooked, but can help boost both your bottom line and your performance on the chessboard: Use your head! Don’t run on automatic pilot. Be aware of what you’re doing and put clear thought and consideration into every step you take. Don’t just play with your hands When Georges Renaud and Victor Kahn authored The Art of Checkmate, they wrote: “Chess is played with the mind and not with the hands!” If you want to win a game of chess, don’t just move your pieces around the board. Think your moves through very carefully. Where are your opponent’s pieces in relation to yours? Would moving your bishop over there put your king at risk? The same principle of thinking and not just acting also applies to investing. Before making an investment decision, ask yourself (and your financial advisor) the following: What are the risks involved? How much of a loss can I sustain if things don’t work out? Does this particular decision conform to my financial plan and current goals? Review your financial situation Review your financial plan and see if you are meeting your goals and financial objectives. If not, you may need to make changes to your investments after all. Even if you want to leave your portfolio at its current status quo, this is also an active decision that requires logical thought. “Chess is played with the mind, not the hands” can be a metaphor for thinking and analyzing all your... Click for more
by Doug Goldstein CFP® | Nov 21, 2017 | Decision Making |
The key to understanding investments is to avoid unrealistic expectations. One of the biggest mistakes investors make is expecting too much from an investment. But why do people have unrealistic expectations of their investments? There’s no such thing as getting rich quick For some people, their ideal is to get rich quickly, without having to work too hard. So when they see a potential investment promising a very high yield, they get very excited. But in their haste to realize their dream of instant wealth, they forget the famous maxim, “If it sounds too good to be true, then it probably is.” In fact, investments with very high yields are either extremely high risk or shady. In their rush to fulfill their unrealistic expectations, these investors ignore their better judgment and have an incomplete understanding of the situation. This can be compared to when you are playing chess and you suddenly see that the path towards your opponent’s king is wide open in front of you. You may not stop to think that things may not be as they seem. It is much easier to just look at the squares in front of you, instead of at the whole board. You move your queen into position, ready for check. Suddenly, your opponent’s piece comes out from a direction that you didn’t expect and takes your queen! You are now left wide open to an attack, and the game is not going in the way you expected. Why weren’t you more careful? Your unrealistic expectation of an easy win impaired your ability to think things through clearly. Consider the risks... Click for more
