Try to Avoid "Titanic" Investment Mistakes

It's been 107 years this month since the tragedy of the Titanic. Of course, this disaster has fascinated the world ever since, leading to books, movies, musicals and, ultimately, a successful search for the big ship’s remains. On the positive side, commercial shipping lines learned a great deal from the Titanic, resulting in safer travel across the oceans. And as an investor, you, too, may be able to draw some important lessons from what happened on that cold April night more than a century ago. Create a financial strategy with a solid foundation. Although considered a technological marvel, the Titanic had some real structural, foundational flaws – such as compartments that weren’t fully watertight. To withstand the inevitable rough seas ahead, your investment strategy needs a strong foundation, based on your needs, goals, family situation, risk tolerance and time horizon. Be receptive to advice. The Titanic had far fewer lifeboats than it needed, resulting in a tragic loss of life that could have been prevented. As an investor, you need to be prepared for events that could jeopardize your financial well-being, and that of your family. So, at a minimum, you need to maintain adequate life and disability insurance. And it’s also a good idea to build an emergency fund containing six to 12 months’ worth of living expenses, with the money kept in a liquid, low-risk account Don’t overreact to perceived threats. Edward J. Smith, the Titanic’s captain, apparently wanted to break speed records on the Atlantic crossing – and this desire may have contributed to his somewhat reckless passage through fields of ice. As an investor, you could also run into problems if you rush toward a goal. To illustrate: If you wanted to retire at 65 with a certain amount of money, but you didn’t start saving and investing until you reached 55, you’d likely have to put a lot more away each year, and possibly invest a lot more aggressively, than if you had started investing when you were 30. This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.