The Herald Bulletin

July 13, 2013

'Big Joe' Clark: The risk of being lazy with investments


The Herald Bulletin

---- — It’s much easier to be lazy than diligent; this applies to many aspects of life.

We’ve seen companies fail due to syndromes of laziness: allowing safety requirements to sag, not putting in the proper internal oversight, or using one nail when two should be used. Investors are not immune to indolence. In the long run it’s much easier and requires emotional strain to put together a detailed and specific investment plan. There are many rocks that must be overturned in planning for the future but we can’t simply close our eyes and hope it all works itself out.

We hear and read the barrage of stories about fad investment strategies and we’ve all gotten the emails about the penny stocks that shoot up 300 percent in a matter of days. What we don’t see enough are the follow-up stories and emails. The ones that detail the accounts that were taken to zero due to taking on too much risk and the outcome of those penny stocks, when more times than not, they fall from grace and show traders why they are trading for pennies to begin with.

Investing should be taken seriously, no matter if your investment time horizon is a few years or a few decades. Too many non-professionals take up trading as a hobby to only be disappointed that they weren’t the gunslinger they thought they would be. Risk is everywhere and it’s how we manage it that determines our longevity.

It’s easy to think making investments when the market is trending higher is a piece of cake. However, fortunes were made and lost during the tech boom and bust as well as the financial crisis that the global economy is still digging itself out of. The stock market is not a game to be played, it’s a mechanism that does not care if you own Apple or Bank of America; the market is not concerned with how much money has been lost or made, and the trader floors will not be there to console you after a bad trade.

Having a plan in place before the first trade has been created is crucial in having long-term success. There are too many factors that can make an investor question themselves or stray from what is likely best for them, to not have a well-thought-out plan.

The investment world is always changing and adapting to new technology. Paul Farrow from the Telegraph reported that the average hold time in 2012 of a security in the U.S. is just 22 seconds, which is up from 20 seconds in 2011. This is due to the computerized trading that now takes place, with ‘high frequency’ trading making up a bulk of the volume various stock market exchanges experience each day. This is probably why the idea of throwing a dart at a dartboard of stocks isn’t as in vogue as it once was. Many consumers' only experience with investing is around planning for their retirement with 401(k)s and IRAs.

Retirement is too important to allow it to be dealt with on a whim. The risk around being lazy with our retirement can have detrimental impacts on our lives that will unfortunately only be felt when it’s too late.

Joseph “Big Joe” Clark, whose column is published Sundays, is a certified financial planner. He can be reached at bigjoe@yourlifeafterwork.com or 640-1524.