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Is greed holding you back?

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Your money never sleeps

YOUR MONEY REALLY MATTERS

Is greed holding you back?

Michael Douglas, portraying the egomaniac stockbroker Gordon Gecko in the movie “Wall Street” boastfully stated, “…greed, for lack of a better word, is good. Greed is right. Greed works.”

And so it seems that in our capitalistic society, the endless quest for the almighty dollar, the single- minded pursuit of self-interest, and resulting conspicuous consumption are all considered to be part of the American way. But is the system causing us to become a slave to our greed? Is your greed holding you back?

Greed and fear

Greed in its broadest form is the excessive desire to possess worldly goods. It could be the possession of wealth, food, power, sex and even an addiction. It is the desire to have possessions well beyond one’s needs.

A resulting spinoff of greed is hoarding. It is the storing up of items we don’t need or rarely use. We see stories on TV of someone’s home that is so full of stuff, that they only have a small pathway to move from one room to the other. However, what may not be so obvious in our own lives is a look at our own homes.

Do you have rooms you rarely use, clothes in your other closet that still have the tags on them and a basement or attic with possessions that you rarely even look at?

Fear on the other hand is an emotional response to a real threat or even a perceived threat. In the commercial world our fears are exposed, exploited and are sources of corporate profit. Watch the TV commercials that surround the evening news programs. The typical ones fan our fears of grey hair, stomach disorders, auto accidents, being overweight and even falling at home alone.

All of these fit with the evening news, which is pretty fearful in itself. Bad news and fears sell TV commercial time.

Greed and fear are two powerful emotions that can regularly derail us from achieving our financial goals. Greed will cause us to “jump on the bandwagon” and buy at the top of the market and fear will cause us to panic and sell as the market hits the bottom.

The Asian and Russian crises of the late 1990s, the dot-com bust of 2001 and the recent great recession all have the same classic characteristics of first a “run up of greed” followed by a “downfall from fear.” Once we have survived the current crisis, there will be other financial crises in the future. The best way to avoid future “greed frenzies” and “fear panics” is to have your investment strategy in place, believe in it and follow it.

An investment strategy

Developing an investment strategy begins with creating your short, medium and long term financial goals and then developing an investment strategy to achieve them. Short-term goals can be achieved in one-to-three years, medium-term goals range from three-to-seven years and long-term goals would be 10 plus years away.

n Pay yourself first – Establish an investment goal as a percentage of your gross income. Start at 10 percent and work your way up to 20 percent. Put it on automatic pilot by using payroll deduction, automatic checking account withdrawal, etc. Fix it so the money goes directly to your accounts.

n Put your eggs in several baskets – Diversify your investments. If you work for a company, don’t hold more than 5 to10 percent of your net worth in company stock. If you have a 401(k) retirement plan, spread your investments among several funds. If you have investments outside your company plans, make sure they are diversified also.

n Review and rebalance – Review the performance of your investment accounts twice per year. If some of your investments have performed well, rebalance your winners and laggards to your desired balance. Rebalancing may be a taxable event. Before taking any action, consult with your tax professional.

Determining the proper asset balances and diversifying a portfolio that is appropriate for your family goals can be a complicated task. For the do-it-yourselfers, several personal finance Web sites have portfolio manager programs that allow the user to enter their investment information and then the program analyzes their asset balances and risk profiles. Others may want to consult with their financial advisor to help develop an investment strategy.

President Franklin D. Roosevelt in his first inaugural address in 1933 reassured the nation mired in the Great Depression by declaring, “The only thing we have to fear is fear itself.”

Greed and fear are all around and are a part of the financial landscape. If you are prepared and have faith in the future, you and your family will be able to overcome the consequences of greed and fear.

Michael G. Shinn, a Certified Financial Planner, is a registered representative of and securities and investment advisory services offered through Financial Network Investment Corp., a member SIPC. Visit www.shinnfinancial.com for more information or to send your comments or questions to shinnm@financialnetwork.com.

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