Looking back over the last few months my thoughts here seem to have a theme.  The theme goes beyond the mechanical process of investing and planning, it invites a lot of emotions.  The simple emotions that are related to decision making concerning long term plans are usually typical.  They include deciding who in our life will make decisions for us and take care of us if the needs arise, as well as where we want to age.

The other emotional issues that may not get addressed are the changes in portfolio strategies as our needs change.  The nomenclature for changing investment strategies as we age and gear for retirement is known as “moving from the accumulation phase to the distribution phase”. 

I have witnessed cases where this move was not as gradual as it should have been.  It may seem mechanical and not emotional, however there are times when investors may feel a connection to certain investments such as stocks that have been held for a long time, and this is very understandable.  There have been growth vehicles that have done very well for investors as it brought them to the point where thier assets will generate enough income to maintain a desired lifestyle.  However, they may not be suitable for the changes that typically take place when portfolios adjust for the next phase.  Plus, more importantly the risk associated with certain investments that have been held for a long time may not be apparent. I believe that there is no reason to take unnecessary risk at any time.

Sometimes humans have short memories. If we combine a short memory, with lacking some understanding of inherent risks associated with the markets, and add in the constant pressure to outperform markets, it may lead to very big changes in one’s plans, and not the desired changes.

Peter Janowsky