No Fear.

Fear and worry are paralyzing.   When I jump in the ocean I fully expect to get eaten by a shark especially if I go swimming during the Discovery Channel’s Shark Week.   When I go hiking in the mountains I know I’ll have to fight off a sloth of bears.  In Texas, every stick is a rattle snake.    Of course, my fears are unfounded.  I’ve not been eaten by a shark, fought with a bear, or stepped on a rattle snake.   Fear of the unknown will keep us from enjoying life and experiencing our big blue planet.

A person has a 1 in 3,700,000 chance of being killed by a Shark.  The odds of dying from the flu are 1 in 63.[1]   Sharks, alligators and bears each kill about one person per year according to a 2015 Washington Post article.   Venomous snakes and lizards kill around six people annually.   Approximately 48 people are killed by a cow or dog each year.[2] 

A Bible search for the words “fear” and “worry” produced 351 results.[3]  Most verses with fear and worry are preceded by do not as in do not fear or do not worry.

So do not fear, for I am with you; do not be dismayed, for I am your God. I will strengthen you and help you; I will uphold you with my righteous right hand. ~ Isaiah 41:10

Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own. ~ Matthew 6:34

Investors appear to live in a constant state of fear and worry.  Here are a few views on how to overcome some common investment fears.

1.       Fear of a stock market correction.  Diversify your assets to limit your exposure to a stock market correction.   Investing in bonds, small companies, real estate, gold, and international investments will cushion the blow from a stock market correction.   These additional asset classes reduced your losses by 44% during the 2008 stock market correction.[4]

2.       Fear of running out of money.   Longevity risk is a concern.   To avoid this risk, invest in stocks.  The stock market has produced a 10% average annual return since 1926 while the bond market generated a return of 5.6%.  $1 invested in stocks is now worth $5,386.  $1 invested in bonds is worth $132.   Stocks outperformed bonds by a ratio of 40 to 1![5]

3.       Fear of rising interest rates.   Rising interest rates will lower bond prices.   Invest in a bond ladder to protect yourself from falling bond prices.  A portfolio of bonds maturing every year will allow you to invest in both short term and long term bonds.  When a short-term bond matures invest the proceeds in a new bond with a higher interest rate.

4.       Fear of missing out.  FOMO is real!  Don’t chase returns on a high-flying stock.   If you want to buy a stock after it has appreciated significantly, wait for it to pull back before committing capital.

Do not let fear keep you from achieving your financial dreams.  Plan for your future and good things will happen.

The only thing we have to fear is fear itself. ~ FDR

Bill Parrott is the President and CEO of Parrott Wealth Management.   For more information on financial planning or investment management, please visit www.parrottwealth.com.

Note:  Your returns may be more or less than those posted in this blog. 

April 28, 2017

[1] http://natgeotv.com/ca/human-shark-bait/facts, website accessed 4/27/17.

[2] https://www.washingtonpost.com/news/wonk/wp/2015/06/16/chart-the-animals..., Christopher Ingraham, June 16, 2015.  Website accessed 4/27/17.

[3] https://www.biblegateway.com/, website accessed 4/27/17.

[4] Morningstar Office Hypothetical Tool.

[5] 2016 Dimensional Funds Matrix Book.