Comfort zone investing is satisfying and profitable. Getting to your comfort zone is a simple three-step process:
1. Learn how investments trigger emotions.
2. Learn who you are as an investor.
3. Match yourself and compatible investments.
Once you have discovered your comfort zone, returns will be high and investing will not cause you emotional distress.
If you do not know what your comfort zone is, it may be less stressful to spend your excess cash on a trip to Hawaii than to invest it in a popular tax advantaged asset such as a 401(k) stock fund.
The purpose of investing is not to make you miserable. The purpose is to increase the sense of security, serenity, and satisfaction in your life. Therefore, compatibility is important, maybe even more important than return on investments.
Investors who find real estate within their comfort zone will do very well with it, regardless of market conditions. Investors who are emotionally compatible with stocks can be equally successful in the stock market. Today’s most respected investment brand name is U.S. stocks. The stock index fund in a tax-deferred 401(k) is considered a sure thing by the public and investment professionals alike. Studies show that consumers remain loyal to their purchases despite mounting evidence of mediocre and poor performance. To their detriment, real estate buyers remained loyal to real estate until the final crash in the early 1990s. This emotional mistake is being repeated today. Today even behavioral economists invested in the stock market defend stocks as the only asset class for long-term investors.
Today everybody is supposed to have the right emotional makeup to invest in stocks. Everybody doesn’t.
