Financial Advisors Concerned About Consumer Optimism
BOSTON (CBS) - Every day it seems like we face a barrage of bad economic news. It's enough to get even the sunniest optimistic down.
But a new survey, conducted by Weber Shandwick and KRC Research, found 70 percent of Americans now have an optimistic outlook about their household finances over the next two years.
Although optimism is good for your health and reduces stress, some financial advisors are concerned about this new economic confidence. They fear consumers could make some of the same mistakes that got them into trouble a few years ago.
Advisor Terrance Odean says we shouldn't be lured by financial fads. "Put most of your money in sound long term investments and give yourself a little pot that you can play with. Take 10 percent of your money and go for it, chase that stock that you're sure is going to be the next Google, but don't do it with your entire portfolio," he advises.
He also says to remember that nothing is a sure bet, so make sure that no one investment will wipe you out.
Also, think before you spend. If you're feeling giddy for any reason, whether it's a raise or your daughter's good report card, then that's a bad time to part with your money. He advises you wait to make important financial decisions when you feel more level headed.
Another tip: Don't postpone saving because you optimistically assume you'll earn more in the future. Odean explained, "Keep the dreams. They make it more fun to get up in the morning, and got to work. But cover your bets."
It's best to go slow and steady, according to Odean. There's a reason financial advisors praise the so called miracle of compound interest.
