While the stock market correction that has occurred during
the past three weeks has cost many investors a fortune, there
is opportunity to be had for others. The problem for most
of us is we just don’t understand how to take advantage
of it.
Whether it’s the stock market or the real estate game,
investing isn’t for novices. That’s why financial
planners exist and why retirement accounts force us to store
away money until we’re, presumably, wise enough to
know what to do with it.
According to Warren Buffett, the no-nonsense multi-billionaire
who made his fortune on Wall Street, making sure you understand
your own bottom line is just as prudent as watching your
diet or regularly visiting a doctor. “Being smart with
your money isn’t a greedy exercise, but a healthy one.
Wealth and prosperity gives us security,” he has said.
So how do you acquire financial smarts? Buffett and many
other money experts say security is gained through awareness
of the rules of investing. Perhaps most importantly it’s
comprehending what works best for your individual lifestyle
and goals. Financial advisors can explain to you about liability
of ownership, risk management, leverage and diversification,
but your job is to let them in on what your aim is for the
wealth you hope to attain.
“One key way to know more about money is to learn
about yourself. If you can separate your needs from your
wants, you’ll be far ahead in the money game and the
game of life as well,” says Don Silver, author of “The
Generation Y Money Book: 99 Smart Ways to Handle Money”.
It also helps to understand the value of money and how it
accrues, Silver says. While investing has proven to be a
reliable way of getting rich, it’s not like winning
the lottery. Money takes years to mature, regardless if it’s
in real estate or stocks. Investors need to be patient and
discerning with their purchases while they wait for portfolios
to pay off. And history says that in due time there will
be a substantial profit.
Since 1978, the stock market has returned 11.5 percent to
North American investors annually while real estate has averaged
eight-percent growth, by many estimates. Despite the lower
rate of return, owning your home seems to be the most convential
route to financial security. The U.S. Federal Reserve says
the average home owner is 34 percent wealthier than the average
renter. A reason the stock market outperforms real estate,
though, is often because of times like these, when wide-spread
fear leads to buying opportunities. The key, of course, is
knowing what to purchase and when, particularly in the coming
weeks when shrewd traders will look to capitalize on the
Wall Street downturn.
“If you keep your eyes firmly on the fundamental value
of good stocks you know, you might be handed bargains on
a silver platter - if you can control your emotions and buy
at the right price, when everyone else panics,” Avner
Mandelman, the president of Toronto-based investment firm
Giraffe Capital Corp., says in the Report on Business.
With the Dow Jones Industrial average plummeting 763.88
points since breaking the 14,000 mark on July 19, the volatility
in the market has frightened many new and experienced investors.
What’s at risk is that all-important security Buffett
speaks of. While a stock market slide can affect the economy
in a variety of ways, it’s impact is mostly felt by
those financial professionals who trade on a daily basis.
For the individual too busy with work and life to closely
follow the markets, thinking about the future is what should
drive financial decisions. Buffett once said, “I never
attempt to make money on the stock market. I buy on the assumption
that they could close the market the next day and not reopen
it for five years.”
So patience, fortitude, self-restraint and a vision of brighter
days are among the keys to gaining money smarts. As Silver
says, “See the big picture to get the will power to
work toward your long-term goals.”
<< top >
|
