While investors know there are risks in investing, what investors do not fully appreciate is that there are greater risks in not investing.

In December 2020, American households were holding about $16 trillion in cash – more than three times as much as at the beginning of 2000, according to the Federal Reserve. Having this much cash on the sidelines can be risky for investors, especially during periods of high inflation.

By not investing, you will not achieve your long-term financial goals to build wealth and attain financial freedom. Ultimately, it’s important to remember the reasons why you’re investing and to fully understand the risks of not investing.

Your investment goals are as unique as the route you take to reach them. But regardless of your course, investment firm Edward Jones believes the following 10 investing “rules of the road” can help you in the long term get where you want to be.

1. Develop your strategy

You need to determine and clearly write down your long-term goals, investment time frame and comfort level with risk – before devising an investment strategy. The more you can outline what you are trying to achieve, the better you can tailor your strategy and develop your plan.

Use market declines and automatic investing to your advantage: Edward Jones recommends a disciplined approach. Consider investing a set amount every month, regardless of what the market is doing, to help take emotions out of the equation. Interestingly, this strategy can help turn market declines into opportunities.

2. Understand the risk

As a rule, the higher the return potential, the more risk you’ll have to accept. To determine what makes sense for you, your financial advisor will want to know:

• What is your comfort level with risk? Understanding this can help him or her determine how you may react to market ups and downs over time.
• How much risk are you able to take? The amount of time you have to invest plays an important role in determining how much risk you’re able to take.
• How much risk do you need to take? Your financial advisor will want to determine the return, and therefore the risk, that may be necessary to reach your long-term goals.

Taking an appropriate amount of market risk may be necessary because it’s difficult to meet long- term goals with only short-term investments.

3. Diversify for a solid foundation

Your portfolio’s foundation is your asset allocation, or how your investments are diversified among stocks, bonds, cash, international and other investments. Your mix should align with your goals and comfort with risk.

Edward Jones recommends having some of your portfolio invested in fixed-income and international investments, because historically a more balanced portfolio experienced a higher likelihood of a positive return over time and helped reduce any potential declines. Ultimately, your specific mix of stocks and bonds will be driven primarily by your goals, your risk tolerance and the time until you need the income in retirement.

4. Stick with quality

Of all the factors to consider when investing, Edward Jones believes quality is one of the most important. It’s also one of the most overlooked. Although it may be tempting to buy a popular investment, it may not fit with the rest of your portfolio, and it may be riskier than you expect. If it sounds too good to be true, it probably is.

5. Invest for the long term

Despite stories of fortunes made on one or two trades, most successful individual investors make their money over time, not overnight. One of the biggest mistakes you can make is trying to “time” the markets.

Typically, market declines aren’t what derail your strategies; it’s our reactions to those declines. While stocks certainly can be volatile short term, the long-term trend for stocks has been positive – the longer your time horizon, the higher the likelihood of achieving a positive annual return.

6. Set realistic expectations

First, you’ll need to determine the return you’re trying to achieve – which should be the return you need to reach your goals. Then you can base your expectations on your asset allocation, the market environment, and your investment time frame.

7. Maintain your balance

Your portfolio’s mix could drift from its initial objectives from time to time. You can rebalance to reduce areas where your investments are overweight or add to areas where they are underweight. By rebalancing on a regular basis, you can help ensure your portfolio remains aligned with your objectives and on track to reach your long-term goals.

8. Prepare for the unexpected

Unforeseen events could derail what you’re working so hard to achieve. By preparing for the unexpected and building a strategy to address it, you’ll be better positioned to handle the inevitable bumps along the way.

9. Focus on what you can control

Every investment is the present value of future cash flow. Everything Money

You can’t control market fluctuations, the economy, or the political environment. Instead, you should base your decisions on time-tested investment principles, which include:

• Diversifying your portfolio
• Owning quality investments
• Maintaining a long-term perspective
• Buy with a margin of safety

Any time you go through periods of market fluctuations, it’s important to remember why you’re investing – to reach a financial goal. And if retirement is that goal, the bottom line is one word: cash flow.

10. Review your strategy regularly

The one constant you can expect is change. That’s why it’s so important that you review your strategy on a regular basis.

To regularly review your strategy and make the adjustments you need, you can have a clearer picture of where you stand and what you need to do to help reach your goals.

Ultimately, it’s important to remember the reasons why you’re investing and to fully understand the risks of not investing. The potential risk of not investing is that you do not retire on your terms. Instead, you risk retiring either later than you have planned or with a potentially reduced lifestyle.

The key is finding balance – not too much investment risk, while ensuring you have enough growth potential to reach your long-term financial and retirement goals.

References:

1. https://www.edwardjones.com/sites/default/files/acquiadam/2021-11/RES-7558-A.pdf
2. https://www.edwardjones.com/us-en/market-news-insights/personal-finance/investing-strategies/investing-rules

There is a difference between money and wealth.

Does Bill Gates have a lot of money?

The answer is no. What Bill Gates has is a lot of wealth, which is determined by his net worth (the difference between his assets and his liabilities). Bill Gates does not have $76 billion in cash.

Money is the medium that buyers give sellers in exchange for goods and services.

His wealth is measured by net worth; his assets include his Microsoft stock and his 22-bedroom home in Washington State, which is valued at over $150 million. He cannot take his house or his Microsoft stock to McDonald’s and buy a cheeseburger with it, but he could take a $10 bill there to buy one.

According to the Mind over Money survey by Capital One and The Decision Lab, 77% of Americans report feeling anxious about their financial situation.

Financial decisions are some of the most stressful, complex and impactful choices we make. More than three in four Americans (77%) report feeling anxious about their financial situation, according to a new Mind over Money survey by Capital One and The Decision Lab.

Financial worries include a broad range of issues from savings and retirement to affording a house or child’s education.

The study found that financial stress caused:

• Feelings of fatigue (43%)
• Difficulty concentrating at work (42%) 
• Sleep interferences (41%) 

Stress is also linked to worse financial attitudes and practices. Even when controlling for household income and FICO scores, Americans who experience higher level of stress are: 

• Less likely to save on a regular basis
• Less likely to plan their spending
• Less likely to feel in control 
• More impulsive with how they spend their paycheck 
• Less likely to agree that success comes to those who work hard

Right Money Mindset

The right money mindset may improve Americans’ financial decision making, mitigate effects of stress according to Mind over Money survey. Research shows that a change of perspective can have a positive impact on your financial wellbeing. 

A smarter money mindset for people must include creating a positive financial outlook by implementing healthy financial rituals. Money is less stressful when you’re able to see your current situation a bit more clearly. Tips include: 

Practice These Tips to Develop a Smarter Money Mindset 

1. Make important decisions under low stress – Next time you have to make a financial decision—like booking a vacation—you could try to schedule the decision at a time when you’re naturally more relaxed and have the cognitive bandwidth to consider the long term impact of your decisions. You can’t choose to be less stressed right now, but you can choose to put off your decision until a moment when you’re less stressed.

2. Focus on values over features – One of the more interesting findings is that thinking more abstractly makes you better with money. Unfortunately, in your daily lives, you can often get bogged down in details. For example, you get lost comparing products to each other and lose track of how the products compare to your core values and goals. Next time, you find yourself absorbed in comparing different products, you can ask yourself: “How will this purchase affect my long-term goals? Is it consistent with what I want in life?”

3. Use goal-directed accounts – To help focus on your long-term goals, one simple way to do this is to set up goal-directed banking accounts. For example, you can name an account after a big life goal such as “buying a house,” and then use this account for your savings pool.

4. Don’t punish yourself for the past—be kind to yourself when reviewing purchases – Stress can push us to make decisions based on whatever feels most satisfying at the moment. In some cases, these decisions can lead to regret, which can lead to further feelings of stress, and so on, creating a vicious circle. Next time you are thinking about past purchases, and there is one you are not happy about, you can try to accept it, acknowledge that it was a mistake, and formulate a plan to avoid it next time. However, try not to stress too much about it—because the stress itself can make you less likely to do better.

5. Use the good times to shift your habits to support your mindset change – Research shows that stress causes us to engage in more habitual behaviors instead of deliberate ones. However, since stress can’t always be avoided, forging good habits when times are better can protect us when things get tough. Examine your habits critically when you are in a relaxed state. In particular, think about what positive changes to your habits are most likely to carry over to your actions when you encounter stress again.

6. Focus on what you can control instead of what you can’t – While you cannot immediately change your financial situation, you can change the way you think about it to improve the decisions you make about your finances. The next time you are faced with a financial decision, try not to get caught up thinking about what you wish you had—instead, you can try to focus on what is within your control and what you can change.

7. Go from problem to solution oriented – When you’re under a lot of financial stress, it is easy to get caught up in the problem and all its details. Our research has demonstrated that part of feeling in control (which predicts financial anxiety) is knowing how to overcome the problem—and this has to do with identifying clear solutions. The next time you’re faced with a difficult financial situation, try to spend your bandwidth coming up with strategies to overcome it. This may not only help you take action faster, but it could help you feel more in control of the situation (which in turn could reduce your financial stress!). 

8. Keep your goals in front of you – To overcome present bias, you can try keeping your goals salient so that whenever you are confronted with a decision, you will be forced to consider how it will affect your financial goals. For example, you can write your goals out on a piece of paper and stick it by your bedside or your door or you can put it as a screensaver on your phone—these small reminders will ensure that your goals are always top of mind, especially when making financial decisions. 

9. Share your goals with people who might have similar goals – Research has demonstrated that people are more likely to follow through on their goals when the goals are shared publicly with others. Under financial stress, making your goals more social, especially with others who might share them, can help to make them more real. By surrounding yourself with people who know and share your goals, you are creating a virtuous circle that will make your goals easier to achieve.

10. Do something kind for someone – Shifting your focus from yourself to other people can go a long way in changing your mindset, reducing stress and making you feel good about yourself while helping others. The next time you feel yourself getting overwhelmed by a financial decision, you can try to shift gears and see what you can do to help out a friend, family member or stranger. Most people have their own challenges—seeing that reality can be a powerful reminder that you are not alone. Now that you’ve shifted your focus, you can go back to your problem with a different perspective.

• Keep your goals in front of you: People have a tendency to discount better future rewards for short-term gains and gratification. To overcome this, you must try to keep your financial goals front and center, like making them a screensaver on your phone or posting them on your refrigerator.
• Focus on the values and don’t sweat the details: People get lost comparing products to each other and lose track of how the products compare to our core values and goals. Next time you get absorbed in comparing a whole aisle full of different coffee makers or TVs, you can ask yourself: “How will this purchase affect my long-term goals? Is it consistent with what I want in life?”
• Don’t punish yourself for the past—be kind to yourself when reviewing purchases: Next time you are thinking about past purchases you are not happy about, try to accept it, acknowledge that it was a mistake, and formulate a plan to avoid it next time.

Financial education program are needed to help you plan out your goals in life—and think through how your financial behaviors connect to those goals. You can work towards achieving your financial well-being.

References:

1. https://www.capitalone.com/about/newsroom/2020-capitalone-mindovermoneystudytips/
2. https://www.capitalone.com/about/newsroom/mind-over-money-survey/

The Mind over Money Study was conducted by The Decision Lab on 1,011 nationally representative US adults over the age of 18. The study took place between March 10 and March 11, 2019.

“We are what we think. All that we are arises with our thoughts. With our thoughts, we make the world.” – Unknown

Originally developed as a martial art, Tai Chi is typically taught as a series of slow, low-impact movements that integrate the breath, mind, and physical activity to achieve greater awareness and a sense of well-being.

Tai chi is an ancient Chinese tradition that is currently practiced as a graceful form of exercise. It involves a series of movements performed in a slow, focused manner and accompanied by deep breathing. Each posture flows into the next without pause, ensuring that your body is in constant motion.

Tai chi has many different styles. Each style may subtly emphasize various tai chi principles and methods. There are variations within each style. Some styles may focus on health maintenance, while others focus on the martial arts aspect of tai chi

Tai chi is low impact and puts minimal stress on muscles and joints, making it generally safe for all ages and fitness levels. In fact, because tai chi is a low-impact exercise, it may be especially suitable for an older adult who otherwise may not exercise.

Although tai chi is slow and gentle and doesn’t leave you breathless, it addresses the key components of fitness — muscle strength, flexibility, balance, and, to a lesser degree, aerobic conditioning. Here’s some of the evidence:

• Muscle strength. Tai chi can improve both lower-body strength and upper-body strength. When practiced regularly, tai chi can be comparable to resistance training and brisk walking. It strengthens both the lower and upper extremities and also the core muscles of the back and abdomen.
• Flexibility. Tai chi can boost upper- and lower-body flexibility as well as strength.
• Balance. Tai chi improves balance and can reduce falls. Tai chi also improves muscle strength and flexibility, which makes it easier to recover from a stumble.
• Aerobic conditioning. Depending on the speed and size of the movements, tai chi can provide some aerobic benefits.

When learned correctly and performed regularly, tai chi can be a positive part of an overall approach to improving your health and overall well-being. The benefits of tai chi include:

• Decreased stress, anxiety and depression
• Improved mood
• Improved aerobic capacity
• Increased energy and stamina
• Improved flexibility, balance and agility
• Improved muscle strength and definition

While more research is needed to determine the health benefits of tai chi. Some evidence indicates that tai chi may also help:

• Enhance quality of sleep
• Enhance the immune system
• Help lower blood pressure
• Improve joint pain
• Improve symptoms of congestive heart failure
• Improve overall well-being
• Reduce risk of falls in older adults

During the past 50 years more than 500 trials and 120 systematic reviews have been published on the health benefits of Tai Chi, according to National Institute of Health. Systematic reviews of tai chi for specific conditions indicate:

There is excellent evidence of benefit for preventing falls, osteoarthritis, Parkinson disease, rehabilitation for chronic obstructive pulmonary disease, and improving cognitive capacity in older adults.

There is good evidence of benefit for depression, cardiac and stroke rehabilitation, and dementia.

There is fair evidence of benefit for improving quality of life for cancer patients, fibromyalgia, hypertension, and osteoporosis.

Further systematic reviews of general health and fitness benefits show:

• There is excellent evidence of benefit for improving balance and aerobic capacity in those with poor fitness.
• There is good evidence for increased strength in the lower limbs.
• There is fair evidence for increased well-being and improved sleep.

There is abundant research and scientific evidence supporting the health and emotional well-being benefits of Tai Chi, according to the National Institute of Health.

“Health is our greatest possession. Contentment is our greatest treasure. Confidence is our greatest friend.” Lao Tzu

References:

1. https://pubmed.ncbi.nlm.nih.gov/28661865/
2. https://www.mayoclinic.org/healthy-lifestyle/stress-management/in-depth/tai-chi/art-20045184