Posted by Tim Stobbs on April 10, 2013
You know that nervous feeling you get before you do something new, I get most of the time when I’m making my investment decisions. Despite reading a fair bit on the subject and having done fairly damn amazing on some investing decisions (doubling my TFSA value for example). I still have no confidence on the subject. I feel like a talented amateur at best.
Why? I think perhaps I read some other blogs with more of an investing focus and my mind is like…I can’t do that. I’m not that interested in investing as a topic, I like the results of investing, but reading theory and practice doesn’t do that much for me (other than make me want a nap). So in the end I don’t write on it….heck the astute reader would notice I don’t even comment much on it. Given I write a blog about money I think people assume I know lots on investing when in fact I think I have a lot to learn yet myself.
Yet I’m hitting an important brick wall in my plan to achieve financial independence. I’ve got massive stream of money going into my investment accounts that if I don’t start making some decisions I’ll screw up the plan. So after internal debate on the topic I’ve made some basic decisions on where I want to go.
First off, a little background theory. In most cases people tend to have two different sets of portfolios: 1) the accumulation phase – where they are saving up for retirement and 2) the income phase – where they draw down their investments to live on. The object in #1 is all about growth, while in number #2 the end focus is more about sustainable yield. I’ve been struggling with the fact of my compressed accumulations phase how much risk should I take. In the end I played around with some online calculators and came to an important conclusion: my rate of return means jack to my plan (for the most part).
Pardon!?! It’s true, my saving rate is so high that even a really low rate of return doesn’t mean much to the plan. Perhaps $50,000 difference at the tail end of seven years, which is fairly minor in the grade scheme of things. So with that fully in mind I’m skipping the accumulation portfolio and jumping directly income portfolio. Yes it may delay the plan if I screw up, but I have to get moving on my investing. Not making a decision is worse than a wrong decision after all.
As I crawl up on my investing diving board, please try not to laugh too hard if I belly flop (a giggle is fine, but try to repress the laughing at my face).
So how about you? Do you fear investing decisions? Why or why not?