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Investing in an Environment of Fear and Greed

You’ve heard it before – many times – and you are still seeing it today: the two traits that dominate the financial markets and investors are fear and greed. As the bull market continues, the financial industry news is cluttered with stories, blog posts and articles warning about how the markets are overvalued and we are “overdue” for a correction. (“Correction” is one of those financial industry terms which, like “haircut”, means something a great deal more painful to investors than the word itself describes.)

What is perhaps interesting is that while everyone is warning investors, the various writers and authors all have different suggestions or solutions for the expected market trouble. Not surprisingly, the advice typically involves either the products the writers are promoting or whatever approach fits their personal experience and bias. Any connection to investors generally, let alone their best interests, is not apparent.

At the same time, these writers also may point to other factors which, they believe, will potentially cost investors money directly or indirectly contribute to that anticipated market correction. These run the gamut from government limiting access to accounts or actually seizing assets to riots and insurrection to bringing down the grid and more. If readers were to believe even a small percentage of these warnings – and their accompanying investment “advice” they would have every right to be afraid and, at the same time, greedily hoping to protect themselves in a variety of ways.

What is an adviser to do when investors raise these fears and desires, fueled by the plethora of writing directed at investors and full of contradictory suggestions? What is sad is how many investors are calling advisers now – summer 2017 – and only now are looking to get out of the cash positions they took a year ago prior to the election or even longer ago in some cases. This makes recommendations more difficult as investors have missed out on substantial growth and, of course, are not guaranteed the same kinds of profits, or any profits, going forward. So, there is your question – what would you tell an investor in this situation?


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