Investing is a lot like finding your way through a jungle. Riddled with hidden dangers and unexpected twists and turns, navigating it can be very challenging—unless, of course, you have the right guidance.
Peter Disch, a seasoned financial advisor and Founder of Boston, Massachusetts-based advising firm Great Point Wealth Advisors LLC, knows the terrain well.
After more than 22 years in the financial services industry, Disch works with his clients to achieve their investment management, asset allocation, tax minimization, estate planning, and income generation goals. He has honed his expertise by guiding his clients through unpredictable markets, ensuring they reach their goals, whether it be long-term growth or short-term gains.
He shares a few of the biggest mistakes people make with their finances and how to avoid them.
“One of the biggest mistakes people make with their finances is they buy high and sell low,” begins Disch, adding that it’s a “completely backward” approach to investing.
“Sometimes, I’ll speak with clients, and they’ll say something like, ‘The market is doing terribly right now; let’s wait till it gets better, and then I’d like to invest,’” he says.
But, according to him, doing so is “basically the same thing as walking into a store where there’s a 40% discount on a suit you want to buy, and you leave without buying it because you want to wait for it to get a little bit more expensive.”
“It makes no sense,” he says. Similarly, another mistake people make is when they are down 40%, they go ahead and sell. “What ends up happening there is you take a temporary decline, and you make it a permanent loss,” he continues.
Disch emphasizes that understanding market cycles and maintaining a long-term perspective are crucial for successful investing. By avoiding the impulse to react to short-term market fluctuations, investors can better navigate the financial terrain and achieve their goals.
Disch says the third biggest mistake people make with their finances is “not being thoughtful about time frames and how those time frames relate to your money.”
He highlights that when it comes to investing, there are two ends of the spectrum—money for long-term goals such as retirement and money for short-term goals like buying a home in a couple of years.
Disch shares an example: “If you have a 401K or an IRA and you’re 45 years old, there are exceptions, but for the most part, you’re not going to be spending that money until you’re 60, so you’ve got a 15-year time horizon on that money.”
That money should be invested “pretty aggressively,” he says. “You should be out there actively seeking to capture the returns that are readily available in the market.” On the other hand, when it comes to buying a home, “that timeframe is much different than that of a retirement timeframe, and so that money needs to be invested much differently,” he says.
“Lots of times, people would say, ‘I know I have this expense for half a million dollars that’s due in three years, but I don’t want to just earn 3% on my cash over the next three years, so I’m going to invest that in the equity market but because the market can go down at any point in time for any reason, all of a sudden your half-million dollar down payment is $300,000,” he continues.
What ends up happening is that “you become a puppet of the market. If the market is good, your life is good. If the market is bad, your life is less good,” he says. Disch makes the point that you must match the investment risk to the timeframe of a specific expenditure.
By aligning investment strategies with timeframes and understanding market behavior, investors can avoid common pitfalls and do everything in their power to ensure financial stability and success.
Working with a financial advisor helps you align your investments appropriately and achieve your financial goals with greater confidence. A good advisor will not only help you navigate the complexities of the market but also provide a tailored plan that suits your individual needs and timelines.
Disch stresses the importance of a personalized approach over generic risk tolerance questionnaires. “A typical financial advisor will give clients a risk tolerance questionnaire, which is basically asking how much pain they can handle,” Disch explains. “But this method is flawed because it often places clients at their maximum pain point during market turmoil.”
Instead, Disch’s approach is to match each dollar of an investment to its appropriate timeframe, creating a balanced asset allocation that can withstand the ups and downs of the market.
In summary, investing doesn’t have to be a nerve-wracking ordeal. Remember, it’s all about staying the course, planning wisely, and making your money work for you.
To learn more about his advisory firm, Great Point Wealth Advisors LLC, or how they can help you with your investment goals, be sure to visit their website or contact Peter Disch today.
