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fi nancialforum Don’t Get Burned T


More Information For additional investing information, including planning advice, tips for choosing a financial advisor, and financial calculators, visit www .moaa.org/investing.


PHOTO: SEAN SHANAHAN


Investors sometimes can be like moths to a fl ame — drawn to the latest “hot” investment. Lt. Col. Shane Ostrom, USAF- Ret., CFP®


, discusses why this is a risky investment move.


“The moth don’t care when he sees the flame. He might get burned, but he’s in the game. And once he’s in he can’t go back, he’ll beat his wings ’til he burns them black.” These lyrics to “The Moth,” by singer/songwriter Aimee Mann, might be about relationships, but they also can apply to investors. The flame is any “hot” investment idea that’s in the media at a particular mo- ment: dot-com stocks, gold, property, mortgage investments, “10 mutual funds you must own now.” Do any of these ring a bell?


A truism in the investment business


is buy low, sell high. Unfortunately, it’s a strategy investors don’t always follow. We are hardwired to be bad investors, because it’s our instinct to run toward the perceived good and run away from the perceived bad. The problem is the perceived good (the fl ame we moths are drawn to) usually is high stock values that are getting attention in the media — which we should be fl eeing. By the time values are high, it’s too late to be thinking about that stock for your portfolio. The investment gets all the media hype because its price has run up enough to demand attention. Its im- pressive performance is because of the professionals and early birds who bought it when it was a bargain. The perceived bad — stock with a


low value — is actually what we should be running toward, not away from. But


people don’t always do this because it can look like a plate of brussels sprouts when you’re 5 years old — unpalatable. Who wants to invest when the media is reporting the markets are losing loads of dollars, people’s portfolios are way down, and the economy is hurting? But the truth is buying low is where the opportunity is and, when done right, off ers less risk. You’re buying a stock that is “on sale” so the price won’t go down much more, if at all, and it off ers plenty of upside potential. Average wage earn- ers have a chance to build wealth only by buying low. Remember this: The great unwashed


masses (us) are the last to hear about an investment opportunity. You hear about something, you decide to buy in, the bubble pops, and you’re left holding the bag. Been there? Who did you blame? The market?


The media is in it for the sizzle. Finan-


cial fi rms play to your emotions: greed and fear. Both know what it takes to get you to watch, listen, and buy. What is being pitched to you right


now? Give it some thought before you jump to buy. Don’t be like a moth fl ying into a fl ame.


MO


— Lt. Col. Shane Ostrom, USAF-Ret., is a CFP® in MOAA’s Benefi ts Information and Fi- nancial Education Department. To speak with a fi nancial planner, contact USAA at (877) 913- 6622 or www.usaa.com/moaa, or visit www .moaa.org/fi nancialcenter for other resources.


FEBRUARY 2012 MILITARY OFFICER 49


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