Goal setting in face of financial adversity - part 1

When it comes to discussion around goal setting and achievement of those goals all the text books talk about having clear values, motivations, action plans and the like. They talk about time management and keeping focus as if it is something unknown to the 'uneducated' masses. But of course we might suspect that the people writing these books are not goal setting 'gurus', they are just writers who have decided to write a book that they hope to sell to make money. Quite simple.

However the one thing that many writers of goal setting books, coaches etc do not take into account very well is the influence of life/other uncontrollable or even some controllable events on the human psyche. Even the best laid plans for goals, even those you thought were important, can be adversely affected by other matters that are important. Today, briefly, I want to talk about how to consider setting goals even when you are being impacted by negative financial events.

So by now even the people living underground know that there is a massive upheaval in financial markets, asset worth and capital allocation in the world at the moment. Many of us are losing a good portion of wealth, seeing assets fall in value and becoming burdened with debt. Now another topic I will talk about soon is the fact that wealth is not real....but to most of us increased wealth makes us feel good and decrease makes us not feel so good. Many people I speak to say that their life goals are impacted by this feeling of becoming 'less wealthy' and seeing money being taken away from them. Many other goals are being pushed aside because of the stress of financial pressures and this is causing lack of motivation, determination, vision - even from those people who would state that they are not motivated purely by money.

This is not something that can be covered in one setting so I've made this part 1. At this time I would choose to leave you with these five thoughts;

1. Learn to focus on what you can control, not what you cannot control. Financial markets move in cycles and for 99.9% of us we cannot determine what happens. Therefore do not blame yourself for what has happened.

2. Whilst we all need money to live, take a breath and truly think about what money means to your lifestyle and way of life. Do you really need the money today? If financial markets move in cycles do you never expect your wealth to increase in the future? Exactly what have you lost? Perhaps it's not about the wealth itself, rather you feel something has been 'taken' from you. Take the emotion out of this thought!

3. Own up to yourself that being financially secure or even independently wealthy, or whatever it is, is important for you. Perhaps look at what you can do to control your finances better...but only within the realms of you can control.

4. Revisit your goals and ask yourself do you still want what achieving the goal will provide? Do they still equate to what you value as a human being. Refocus on these benefits and even include what you can gain financially. Standing still and doing nothing is not going to get you anywhere - if you keep on moving forward things will happen. This is a fact of life - action results in change of status quo.

5. Look at improving your knowledge of investments and perhaps consider taking charge of your own finances a little. Many finance professionals know little more than you in many respects. My other advice is to invest in what you know - I have a friend who invests only in his business only because he knows the value of this in detail.

Why financial market short selling is unfair to the majority of investors

The news gracing the pages of papers and internet sites all over the world during the last six months and most definitely over the last couple, more so than famine, war and all the other 'usual' items deemed worthy of news is that of the financial markets. Everyday the media looks to sensationalise events, oil up or down, mortgages failing or not, banking system collapse etc....but there is also talk about the impact of short selling and impact it has on the direction of the market and the wealth reallocation amongst individuals.

Like many of us who understand or at least pretend to understand the financial markets, main ones being the Dow, FTSE, Hang Seng, Nikkei, we probably tend to agree with a nod of our heads that short selling has its benefits. It was meant to allow a short-term hedge on a long position, whether physical or synthetic or likewise would be used to call-out companies that weren't so strong financially as they seemed. Hedge funds, short sellers continue to stick with this line that they are doing the world a favour by short selling all these stocks to 40, 50, or even 90% of it's current market value. Well if they count the world as their investors I guess they have it right.

The part I would have an issue with from a moral perspective is that many funds, and thus normal investors/the rest of us, are not allowed to short stock and must via mandate hold certain percentages of shares in the major indexes. Pension funds, mutual funds etc are not as flexible in terms of investment strategy as any hedge fund, specialist asset manager or even day trader with a margin account. So this means the majority of the population loses wealth which is re-allocated to the minority of the population who are able to invest this way.

Whilst the losing mutual and pension funds gain a small return by lending stock to the short sellers, who cares when they lose in excess of 50% of the fund's value in that stock. Particularly, as one piece of research shows, fund managers generally have little of their personal wealth in their own funds. Meaning they are not losing their money, but that of their investors.

So until the rules change that permit anyone to short sell the financial market playing field is stacked against the average everyday investor. My advice; learn to invest on your own terms and take your money out of any fund that is not flexible in respect to investment strategy. The writing on the wall says that long only funds will not continue to do well as the market will not automatically continue to rise - therefore short sellers will rule the market. Knowing this don't just sit on your hands and hope for the best. Act today and take your financial well being into your own hands

Society class disconnect for investment opportunities - impact on society development?

Much of the news we watch on tv, read in the papers or on the internet, or even what is the driver behind many of our jobs is all finance and investment related. Though many of us do not have careers in these fields we are constantly looking to make money through property, stocks, private businesses etc etc and takes up a considerable amount of our time - probably more than you are consciously aware. Though the whole concept of discussing importance and non-importance of money and the impact it is having on our lives, more now than ever, is something to be discussed today I want to focus more on the fact that there is a disconnect in respect to investment opportunities for the rich and poor and the impact that is going to have on our society.

It is known that the rich have private bankers and are seen as more important by the organisations that control access to investment opportunities; this provides access to structured products, leverage, initial public offerings, short selling and overall more opportunities to make money while the money is being made. The poor are generally treated with more distain, are provided very generic possibilities (though in today's market not a bad thing perhaps) and options for making money are very one dimensional. The statistics show that the divide between rich and poor is growing with the middle class either moving up or down - this is in respect to both growth and allocation of income and assets.

However more now than ever there is becoming unrest between the 'masses' and the 'elite'. The so-called masses are becoming unsettled with the obscene amount of money made by big business when only the latter can justify the salaries being paid. Hedge fund managers are making hundreds of millions of dollars in salaries and this is generated from profits reallocated from the investments of the 'masses' - put simply the hedge funds make profits and mutual funds make losses. Again one reason for this is that the investment options and techniques available for the hedge funds is far greater than that for the mutual fund.

But the point of my message is this. People losing money are becoming angry and disillusioned with the greed of the big end of town and the fact that they have unlimited money whilst the 'masses' do not and are struggling more and more just to provide basics eg. clothing, food, housing. This must have an impact on our society development and will only drive a divide between those who have and those who do not have. This divide is becoming more and more excessive and as everyone knows, just like a price bubble, all excess at some point will reverse.

Consequences of financial markets greed

There are two things that can be guaranteed in life - and it isn't death and taxes. It's human greed and human anger when being ripped off and lied to, and that is exactly what is happening in financial markets at the moment. I'll focus on Wall Street at the moment because the majority of blogs I read about current market events relates to the US.

Okay so this current financial situation is something new...result of cheap (and unrealistic) credit, Wall Street knowingly providing credit to uncreditworthy families, the parcelling of junk mortgages into AAA securities and onselling to Mums and Dads - all for the sake of providing fee income to the big investment banks (and therefore the large number of overpaid executives). Who can blame the average investor for being angry and feeling hard done by.

Financial markets were never meant for this kind of activity - it was for the facilitation of trade, fair trade where the playing field was level. Now the largest players hold all the cards and you cannot gamble against the house. Except that we don't know which way the 'house' wants the market to go.

However the consequence of this is a huge breach of trust on behalf of Wall Street and one which the average investor will not forget soon. There will now be a strong case of mistrust, while in the past did exist, was not a problem whilst the game was being played relatively fairly and with a degree of visibility. Now it appears that the sole purpose of Wall Street is to reward itself with no regard for why it exists in the first place.

Mark my words...this is the start of the end for the financial markets industry, an industry that in reality creates nothing, adds nothing and is really quite useless considering the large number of people working within it. This latest act of greed has caused negativity toward financial markets to a level not seen before. This is because the problems are not fundamental but caused by a few taking advantage of many for the sake of personal advancement.

Managing financial stress

I believe the entire concept surrounding personal investment and investment strategy is flawed for the reason that there is not enough analysis of the motivations and values behind each individual. Individuals also do not take enough responsibility for their personal finances. We all get told about 'dollar cost averaging' which advises constant investment deposits regardless of how the markets are moving - based on the assumptions that (1) markets will trend up in the long term and (2) you cannot time the market and beat the 'professionals'. We are also told the same rubbish by so-called investment experts over and over again that in fact are so basic at the core that a ten year old could figure this out. The one name that comes to mind is Suzie Orman. My problem after reading her columns is not because what she communicates is wrong - it's that she is made out to be an expert, that many millions of people look to for advice, and the stuff she writes and makes millions off is elementary school finance.

The basic message is this - if you get financial advice that is not aligned to your 'self' then stress will be created that is not manageable. You need to understand what kind of 'investor' you are and establish a risk profile that works for you not for your advisor. The key question for today is 'what would you be willing to lose to make $1,000'.

Do your own research (DYOR)

For a while now I've been tracking and analysing the use of words used in our financial media to reflect the mood of the stockmarket. Words such as 'plummit, freefall and pain' and phrases 'sea of red', 'earnings letdown' and 'sharemarket jitters' are used time and time again. Likewise on an up day you see positive reflections used. Interestingly enough the same phrases are used over and over again but in reality nothing has really changed - the words are simply words used by media to sensationalise the situation and influence your perception of financial events.

Australia and UK are not so bad as the US as with the latter the media articles are often highlighted in green or red to emphasize a point. When we read this information from a source we believe is legit then our emotions take over - when in fact we receive nothing really of substance on a daily basis. To be a little clearer stocks move up and stocks move down on a daily basis - do you really think the core financial health of economies or the valuation of companies fluctuates like this? Of course not...the stockmarket is built around perception and in no way represents any kind of financial reality.

A lot of emotion exists in the stockmarket and for the uninformed investor can create havoc on their financial plans and their quality of life, the latter due to perceived stress surrounding their investments. A key reason is that many of us do not really know what is happening in the financial markets, whether we will have more or less wealth tomorrow, next month or next year. This is due to ignorance. Therefore we turn to so-called 'experts' who tell us we should use their trading systems of which again we know nothing of and then wonder why they don't work. We read and see media that tells us all sorts of things which in the overall scheme of things mean little to us. Compare today's stockmarket level to that five months ago and you wil see little change. However consider the media communications that have taken place and the level of emotion that has been created in the market over the 'so-called' credit crisis and market volatility.

Upon much research I've discovered that is the answer - to do your own research (DYOR). By that I mean research your investments, learn more about what they truly represent, why prices move and why they don't. Look into the volatity that is, potential price fluctuations of your stocks (very important for more speculative companies) and acknowledge your own risk appetite. One way I like to look at it is 'would you rather win or not lose'.

Bottom line take responsibility for the way you behave and perceive money and be aware that the media is there to support a business - not there for your benefit or education.