Summer is my favorite season!  I yearn to be near the ocean and feel the warmth of the sun, the cool breeze off of the ocean and hear the rush of the water.  It always brings me to that peaceful place.  Just knowing it is there for me is a reassuring, safe feeling that I truly enjoy.  My career, on the other hand, has me dealing with an unpredictable environment, one equivalent to the uncertainty of a weather forecast.  I have chosen a path full of volatility and excitement in the investment arena. Although the reactions of investors and the conditions of the market can be erratic, I believe that proper planning can give an investor confidence in both calm and volatile markets.  

Everyone has goals and dreams…that most times require some form of funding.  We all have varying income, expenses, spending and saving habits, and assets (home, car, income property, investments, etc.).  Each of us knows our own ability to tolerate declines in the value of our investments or put simply, how much they are willing to lose, which is termed risk tolerance. All of these factors are paramount to the design of a successful personal financial plan. 

It sounds reasonable and relatively easy doesn’t it?  But what about those  economic pressures and  unforeseen events such as an oil spill, a wavering Euro, a war, the housing market, jobless claims,  a US government deficit and…well, shall I go on?  Couple those uncertainties with a stock market that is driven largely by the emotions of greed and fear. It is truly no day at the beach!

Here are some P.O.M. (Peace of Mind) pointers to think about factoring into your investment habits:

• Be flexible – understand that as changes take place, it may be best for you to consider making some changes in your investments as well.  If someone loses their job in your household, you may need to make adjustments in your spending and savings habits.  It is the same with investing, if there are unforeseen changes or events that take place, be willing to adjust your plan and investments if necessary in order to keep your personal financial plan on track. 

• At the time you purchase an investment, know when you are going to sell it.  If an investment goes down in value 20% will you have reached your tolerance for loss or surpassed it? Should an investment double in value, will you keep riding that wave or take some of the money off of the table at a certain level? There are a variety of stop loss and limit orders that can be put in place to help manage your investments.

• Have realistic expectations.   Have reasonable expectations of both the growth potential and the possible loss as well.  Extreme thinking fueled by emotion can have a significant impact on a portfolio.
  

• Exercise patience.   Be mindful of the assets that are targeted for long term growth.  Investments should be allocated into all three asset classes (cash, stocks and fixed income) and you may choose to put some precautionary measures in place, as recommended above.  In this way, the volatility of market swings will be less likely to have a huge impact on your portfolio.  It may be wise not to react unnecessarily to market news by limiting the time you view your portfolio, possibly once a week, rather than multiple times a day. 

Consider the P.O.M. suggestions mentioned and perhaps you will find that peaceful place where you feel safe (by managing your risk) and reassured (that you will achieve your goals).  Ah, so feel the warmth of the sun, the coolness of the breeze and hear the splash of the waves as you take steps to chart your course for the future.

By Barbara Case

Barbara Case is the Senior Vice President of Investments at Moors & Cabot Investments in Boston. Honored as a South Shore Woman of the Month--- for always giving back--- Barbara is now giving advice to the SSW community in her new financial column.