Are your financial instincts leading you in the wrong direction?

can you trust your gut?

by John Brummitt

Anyone who has watched the news in recent months knows the financial market has been a little shaky (to say the least). Many investors have been overwhelmed by their losses, and some have even withdrawn what is left of their investment. They let the market determine their actions, forgetting why they invested in the first place. Financial analysts tell us this is a common reaction to downturns in the market. It is commonly referred to as “trusting your gut.”

You trust your gut reactions when you have to make quick decisions. Your gut instincts are hardwired to get you out of dangerous situations without harm. That is the way God made us. This comes in handy when you are trying to survive in the wilderness…or even picking a restaurant on a busy street. Usually, you can trust your gut decisions.

When it comes to investing, however, going with your gut may be the worst decision you can make. Making snap investment decision when things get rough usually hurts you more in the long run than riding out the storm.

Of course, if you are planning to retire in three months, you must do something. Protect your investments! Perhaps you should lock into a guaranteed-rate annuity a little early rather than take a bigger loss on your nest egg.

But people who have more time before retirement should avoid snap decisions. Rather than trusting your gut about long-term financial goals, you should rely on the super computer between your ears. If you are tempted to withdraw your investments early, be encouraged. If your retirement plans are set up right, your investments will balance out in the end.

Researchers tell us that people who set their retirement allocation based on their age and only check it occasionally usually fair much better than those who watch the stock ticker minute by minute. The reason is simple. When you watch day-by-day losses, your gut instinct screams a little louder with each loss, “Get out!” On the other hand, those who invest for the long haul stay calmer about the financial future.

The problem is most Americans do not follow a long-term approach when it comes to financial gains. The average 401(K) account in the U.S. has a balance of $22,000 (according to the April/08 issue of Money magazine). That is certainly not enough for retirement.

Most Americans wait until the last possible moment to begin saving for retirement, cramming their investments into the last few years of their career. As a result, they look for the highestrate of return they can find. The result? Risky investing! Risk is not so bad when you are in your twenties, but it is a big deal for older investors. Stop! Think it through. Stop trusting your gut. Find a happy medium, a low-risk plan designed for long-term investment. Then stop letting the market run your life.

About the Writer: A 2004 graduate of Free Will Baptist Bible College, Business Manager John Brummitt began working for the Board of Retirement in the spring of 2006. To learn more about Free Will Baptist retirement options, visit www.boardofretirement.com.