Loving the Roller Coaster Ride: Adjusting Your Investment Portfolio to Suit Your Risk Tolerance

It’s quite ironic to see that medical doctors are some of the most notorious smokers. They’re fully aware of the dangers, not to mention the hospital policies prohibiting tobacco usage on the premises.

Some just don’t care. Others do, however, and are ashamed of their personal incoherence.

But knowing what we ought to do and not doing it is as old as the Bible. Well, actually, it’s even older than that. But it was Paul of Tarsus who honestly wrote: “I do not understand what I do. For what I want to do I do not do, but what I hate to do.”

Too many mistakes occur in our lives simply because we don’t take the time to learn how to govern ourselves. It takes great patience and great effort to discover the distinction between our rational thought, our innermost desires, and our impulsive appetites. The 13^th Century philosopher, Thomas Aquinas, painted it best when he described the human person as a legal system in which the intellect (rational thought) was the governing body, and the appetite (impulses and desires) was the governed body.

Now, take that image, and please tell me what happens if you don’t learn how to govern yourself?

Your day to day life will be one coup d’état after another, and your governing leaders (your intellect; your mind; your voice of reason) will live in fear of those unruly militia spontaneously and irrationally doing whatever pleases them that day (your impulses; your appetite; your desires).

Exhibit A: This weekend’s stock market drops.

People are frantically calling their financial advisers, asking them to pull their money out.

Worst. Idea. Ever.

People are complaining about their retirement money diminishing. Well, if you’ve ever looked at a chart depicting the stock market over the course of the past 50 years, you’ll notice that it tends to go up and down.

Some people have lost their life savings. Well, that means that some people simply invested without taking the time to carefully plan in anticipation of such inevitable moments.

Riding the market is literally like riding a roller coaster: there are ups, and there are downs. But like roller coasters, there are different levels of intensity. If you love the risk, and the thrill, and can afford a faster joyride, then try your hand at more volatile approaches. But if you prefer a steadier and calmer cruise, then find the ride that will ensure such an experience.

It was refreshing to visit some friends this past weekend, because when the Dow Jones dropped drastically on Friday, the first thing my friend did was run to his computer to put more money into some of his stocks.

Buy low. Sell high. So easy to understand. So hard to apply.

If you’re going to invest, take the time to learn how to do it properly, which in large part, involves the regulation of your emotions.

Keep those citizens in control.

Try keeping your lunch down on your next ride.