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Constantly Chasing The Latest Fad

Is A Great Way To Be A Long-Term Loser

BY MICHAEL ROGAN

Special to Tropical Breeze

Last month I discussed the importance of having a plan for your financial future, as opposed to just acquiring a bunch of pieces of a financial puzzle that may or may not fit together. This month I want to reinforce that message by helping people understand what causes them to end up with a bunch of financial pieces, instead of a cohesive plan.

Everyone likes to be associated with a “winner,” like a favorite sports team or player, or a profitable investment. With finances, our concept of “winners and losers” is constantly reinforced in the media. Unfortunately, this can have exactly the opposite result than the one we intend. We have all known someone (possibly you) who said something like, “I had to get out of that loser investment. I put all the money in my other (fund, stock, whatever) one that has been doing so well.” This concept of adding to the “winners” and getting out of the “losers” actually manages to keep most Americans constantly adding to expensive investments and selling ones that have gotten temporarily cheaper. (Obviously, we are assuming that some homework was done in advance and the investments you selected were appropriate and consistent.)

Seeking to buy winners and sell losers causes people to constantly chase the hottest fad. In the decades I have been advising people, the hot investment has been tech stocks, real estate, banking stocks, restaurant stocks, biotech stocks, dot coms, real estate again, and lately gold and commodities. When I ask the fad chasers what their goals were for their investments in the hot idea of the moment, they invariably answer — “to make money.” When I ask them, “what then?”, they look at me incredulously. They hadn’t thought that far out. Apparently, they just figured they would let it all roll onto the next gamble. Performance focused people love to tell you the stories of their great trades, of beating the market and getting richer. Experience taught me years ago that these people rarely talk about the losing trades, the huge mistakes or the small fortunes they invariably squander.

Having goals (which come from having a financial plan) keeps our clients from chasing performance.

Wanting to double your money overnight is not a life goal. In fact, beating the market is not a life goal. Solid financial plans did not need to beat the market in the late 1990s in order to be successful. Likewise, since beating the market over the last seven years essentially required you to break even, most good plans could not afford to simply beat the market by breaking even. Besides, performing better than an ever changing list of 500 stocks is not terribly relevant to your life. Growing a portfolio sufficiently to provide a retirement income is a life goal.

The performance junkies will scoff at this advice and continue to chase the next hot idea. When they fall further behind, they often take even bigger risks. If you saw yourself in this article and you are tired of the results, you can determine today that you will become goal focused and get off the performance treadmill, once and for all. Take the time to spell out your long term financial goals, for you and your loved ones, and then devise a plan to achieve those goals. That way, when the next fad hits, you won’t be tempted to jump in. You can sit back, watch the gamblers brag, then fail, and you won’t be nearly as stressed. Goal focused planning will always work in the long run; being performance based hardly ever works out.

Michael Rogan is president of Rogan & Associates Financial Planners, a locally-owned financial planning brokerage firm based in Safety Harbor. He brings nearly two decades of financial expertise to the local airwaves on the radio show, Financial Planning for Life, heard at 11 a.m. weekdays on AM 1250 WHNZ. For more information, call 727-712-3400 or visit www.RoganFinancial.com.