Fiduciary Standards

Emotions Should not Dictate Investment Choices

Ditch whatever emotional attachments one might have as an investor regarding certain stocks, bonds, companies or even countries. After the Great Recession, financial behavioral analysts renewed their previous encouragement to remove feelings and emotions from investment choices. Not doing so is a losing strategy, as many in the financial media have reported.

John Lindsey couldn’t agree more.

As CEO and founder of Lindsey & Lindsey Wealth Management in Westlake Village, Calif., he believes today’s investor simply cannot afford to remain emotionally tied to the process of selecting which investments to pursue.

“All too often, an investor is emotionally tied to a stock or another type of investment either due to previous performance or simply to the history of always having held that investment,” Lindsey said. “And, all too often, that particular investment represents too large a percentage of their total investment position. I try to remind investors that that the stock doesn’t know you own it and the stock has no emotional ties to you as its investor.”

He is a big fan of diversification.

For Lindsey, investing in real estate is an obvious choice, and he’s particularly keen on commercial buildings chock full of office and retail space. After having weathered the Great Recession and its losses, Lindsey took a transactional interest in real estate investing. He began to think there had to be alternatives that would provide the kind of diversification the stock market simply couldn’t. In studying this, he was seeking ways to protect his clients as well as himself, especially if another market correction of that magnitude should occur. (Real Estate Investment trusts, REIT’s)

He found the idea of investing right at the heart of the economy: the very space where business is conducted.

“No matter what is happening in the economy, the rents collected in commercial buildings – in office space, in retail space – will continue to have a major and steady impact. Because no matter what is going on, those rents still have to be paid. The market being up or down has no bearing on whether those rents are going to be paid.”

Lindsey likes his clients’ portfolios to be as diversified as possible. In his view, one never knows when an “Exxon Valdez”-like emergency will hit a particular company. In his mind, emergencies are simply waiting to happen, and Lindsey doesn’t want his clients going down with the ship just because too much of their portfolio was dedicated to one particular type of investment.

“I do not have another 2008 in me as far as my investment strategies go,” he said with a chuckle that did not mask the stress accompanied with even talking about the Great Recession. “That is why I diversified. I would rather be too diversified than be under-diversified.”

His message is getting across to clients – especially to skittish baby boomers who have fewer years to accumulate wealth prior to reaching retirement age. One of the biggest challenges he sees facing the boomer generation is a big question mark when it comes to whether they will need long-term care.

At anywhere from $5,000 to $7,000 a month on the low end, paying for skilled long-term nursing care or assisted living expenses out of a retirement nest egg whose yolk is close to being drained from prior active retirement living is an enormous end-of-life obstacle.

Unfortunately, many of the long-term insurance products available are on the expensive side.

The best solution Lindsey has found thus far, is for clients to purchase a long-term care policy with a death benefit rider. The insured can use the long-term benefit if necessary. Should they not need long-term, skilled or assisted living care, the death benefit associated with the policy that will go to their beneficiaries is increased.

It’s one way to meet one of the common goals at life’s end: transferring wealth to the next generation.

“People who have a jumbo CD for example are much better served to put that in this type of policy,” Lindsey said, cautioning to read the fine print to ensure the death benefit is indeed what the insured wants.

Long-term isn’t something Lindsey fears. In fact, it is exactly what he looks for in the clients he takes on. He wants to work with folks who are in the investing and wealth accumulation mode for the long haul and not simply for the sake of elusive quick gains. He wants clients who want to go home and think over a proposed change in their portfolios before making a decision.

“If they cannot go home and think about it first, then the answer most certainly should be no, they should not do it,” Lindsey said. Of the idea that one should strike while the iron is hot, he firmly contends, “the deal of a lifetime comes around about every ten minutes. We just don’t invest on those kinds of emotions.”

What Lindsey, along with his partner and daughter, Christina Lindsey Orta, do instead is to apply the lesson learned in Aesop’s fable called, “The Tortoise and the Hare.,” The fast-moving jack rabbit who mocked the slower-moving turtle decided to take a nap mid-race, and found himself beaten by the slower, but more consistent competitor.

“Getting rich quick is not something we aspire to,” Lindsey said. “We are diligent and we are deliberate.”

For more information, visit: www.lindseyandlindsey.com

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