Get clients comfortable with ‘short-term boring, long-term exciting’ investing

Clients can have a hard time understanding what they see in the media about investing versus what they hear from us. We’re encouraging things that don’t sound very exciting. Save more. Spend less. Leave your money alone — for a long time.
Much of what we hear in the news and from the talking heads makes investing look more like a three-ring circus. On top of that, it can feel kind of exciting for clients to think they’re getting a peek into a super-secret investing world. Why wouldn’t you follow the advice of some talking head who claims to make thousands of dollars trading every day?
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But the circus ignores something very important to the individual investor. Much of what we see, hear, and read is about short-term activity. It’s entertaining, maybe even a little exciting. But most of all, it’s speculating.
People are placing a bet that what they hear today can return a profit before things change. There’s no thought to years, only weeks, maybe months.
LONG-TERM EXCITING
With investing, we’re asking clients to look far beyond what the circus is talking about today. As I’ve told clients many times, it’s short-term boring, but long-term exciting. Investing means buying an investment at a certain value and expecting to hold on to it for a long time. That doesn’t make for a very good headline.
When you’re talking to clients, don’t be afraid to keep it simple. Speculating is about buying an asset and hoping the price will change in the short term. Investing is about buying an asset with value and holding onto it for the long-term, believing the value will increase.
(Related: How to help clients cope when markets get scary)
Again, the concept is simple, but the financial media doesn’t always make it easy for clients to understand the difference. You can help clients understand the difference. And by helping them learn to tune out the noise that doesn’t matter, you’re helping them reduce their anxiety as investors.
Carl Richards is a certified financial planner and director of investor education for the BAM Alliance. He’s also the author of the weekly “Sketch Guy” column at the New York Times. He published his second book, The One-Page Financial Plan: A Simple Way to Be Smart About Your Money (Portfolio) this year.You can email Carl here, and learn more about him and his work at BehaviorGap.com.