New clients frequently come to us expressing worries, probably similar to yours, which relate to building or preserving their wealth. Perhaps like you, these new clients face behavioral obstacles that prevent them from making thoughtful decisions about their investment portfolios and then implementing those decisions.

Some people I meet have made poor financial decisions at one time or another in their lives that have cost them a great deal of money. Nearly all of our investment portfolios have lost some value during the course of our lives, and the current global macroeconomic environment is once again causing uncertainty and volatility in the near term.


Many investors, frightened at the thought of again making embarrassing and costly financial mistakes, suddenly feel like deer in the headlights when confronted with a choice about the “right” investment. Often, these investors avoid making choices altogether, even though those choices may be necessary to achieve and maintain long-term financial success for themselves and their families.

Those who take too many of their chips off the table during a stock market drop tend to miss the upturn when it inevitably occurs.

One of the most understandable emotional issues that stands in the way of personal financial success is fear: “What happens if something goes wrong with the next investment choice I make?”; “How will I be able to recover from a bad investment?” Investors whose portfolios are not adequately diversified are generally susceptible to more downside risk than those with well-balanced portfolios.

Further, those who take too many of their chips off the table during a stock market drop, typically by moving too much money into cash, tend to miss the upturn when it inevitably occurs. I do not know any money manager who can project what day to get back into the market, so as not to miss the next major upturn in share prices. I doubt you can, either.


Keep in mind that you are investing for the long term; you are not investing for the next quarter or year. Even if you have recently retired, you still want to build and preserve wealth for decades into the future, not to mention fund any legacies for family or charitable gifts.

Here are two recommendations that will help you overcome your emotion-driven lack of action:

1. First and foremost, understand your investment target return—how much your investments need to grow annually, on average, to build the wealth you require to achieve your goals.

2. Next, get an updated, realistic assessment of your risk tolerance—your ability and willingness to stomach large swings in the value of your portfolio.

With your target return and risk tolerance established, have your current asset allocation reviewed by a wealth manager who can counsel you on an unbiased, fiduciary basis (be sure to ask your wealth manager if his or her work for you is in a fiduciary capacity). The risk/return characteristics of your allocation need to reflect your wealth appreciation goals, whether the objective is to achieve financial independence or preserve your standard of living by staying ahead of inflation.

There is a good likelihood that your current portfolio allocation is no longer optimized to meet your goals. Your wealth manager should be able to run mathematical “what if” scenarios (Monte Carlo simulation models) with your portfolio allocation and give you a better idea of the likelihood of success for growing and having needed or desired wealth. With that information in hand you will be able to make informed investment decisions, getting yourself back on track for growing and preserving your wealth and achieving your financial goals.

This article was originally published in the October/November 2016 issue of Worth.