Form Madness

From a long aggravating IRA application.

Client Investment Objective (See investment objectives on back of form.):

Long–Term Growth
Income
Safety of Principal

Client Risk Profile:

High Risk
Aggressive
Moderately Aggressive
Moderate
Moderately Conservative
Conservative
Cautious

Client will need these funds (Principal Amount):

Within 1 year
1-5 years
5-10 years
10+ years

My answer is YES! to all of the above. I want my money to grow, be safe, and provide an income. I willing to take all sorts of different kinds of risks with different percentages of my money to make this happen, except for high risk. I don’t do high risk. It is a weakness in my investment style. I will need access to substantial amounts of money within a year to get my house ready for sale. I will need quite a bit in the next 1-5 years because I am going to retire at 62 and most likely defer Social Security until I am 66. For the rest of my life I am going to need access to money, quite possibly a lot of money in the last year of my life whenever that might be.

I don’t think you are any different. The key here is identifying how much money needs to be safe, how much can be put at what kind of risk. One dollar a year for a lottery ticket when the prize is $160 Million isn’t bad, $50 a week in lottery tickets purchased by someone on disability is pathetic. 5% of your stash (excluding your primary residence) in gold is probably a good idea. 50% of you stash in gold is dangerous for anyone.

Measuring risk, particularly low probability risks, is something we humans don’t always do very well. The following list is taken from Dave Ramsey on making major purchases. It works just as well when making major investments.

1. Waiting overnight before making an investment. If you are making an extremely time sensitive investment it better be small.

2. Carefully considering your buying motives. Write down why you are making this decision.

3. Never buying anything you do not understand. Cell phone contracts come to mind.

4. Considering the "Opportunity Cost" of your money. (If you buy this then you cannot buy that)

5. Seek the counsel of your spouse and other wise and knowledgeable people.

Now let’s be careful out there.