Some people are very comfortable with volatility and they understand that the markets go through cycles and they’re very comfortable with that. Other people look at their account fluctuate, and they get very, very nervous and they have concerns.
After having done this for so many years I kind of put those two different ways of thinking almost into two different categories. One way of thinking is more like an investor. And the other way of thinking is more like a saver. So, you almost have to determine what kind of personality are you, are you more of a saver.
I could give the example like when I was a young kid I opened up a savings account a passbook savings account. I remember taking my passport savings account to the bank and I make a deposit I’d give them the physical book. It looked like a passport. And they would stamp the book and I’d look at my value and in my savings account. And every time I made a deposit and they added some interest, it would go up in value pretty regularly by whatever the interest was at that time.
That’s basically a saver mentality. It’s having a fixed amount of money that earns a little bit of interest along the way and doesn’t fluctuate. So normally people that have a saver mentality will use savings money markets CDs things that provide more of a fixed rate of return, where there’s not a whole lot of fluctuations.
On the other hand, if you’re an investor and you don’t mind the fluctuations that are involved by trying to gain more return. That’s an investor mentality.
For example, we all have that story where we had a family member or even ourselves bought a house and 15 years later 20 years later 25 years later they sold a house for two or three times what they paid for it. And we say, wow, look at how fantastic that was.
Well, they weren’t checking the value of their house every month. They weren’t getting that passbook savings account to see you know that that book to see what the value of their account was doing the value of their house. So they took a longer-term perspective and there were probably periods during that time when the house went up and down in value. But they took that longer-term investor approach.
So it’s really two different approaches and what often happens is you take someone who’s more of a saver mentality and they start investing and they have a bad experience because they don’t think of it as a long term investment approach.
And that’s where it takes a shift in thinking for someone to be more comfortable with the fact if you’re going to look at your account every day or every week. And now with the internet, we have the ability to log in or even our cell phones login and look at our account every hour, if we want to. Watching that account go up and down in value for some people is just too much to handle. So it does take a shift in thinking, a much longer-term perspective, and comfort level with knowing that the fact that the kind of the account of fluctuating over time but have the greater potential for returns over the long run.