The Pax Financial Blog

Investing Seem Easy? Exciting? Fun? 5 Challenges to Getting it Right

retirement, financial advisor San Antonio Jan 18th, 2021 by: Darryl Lyons

Once upon a time, really not too long ago, investing was thought of as a concern for only the super-rich. But times have changed.

While most working Americans understand the importance of saving for the future and retirement, the last few generations have seen a major shift in retirement vehicles. Up until recently, pensions were common for the average professional, where the employer would be primarily responsible for one’s retirement income. Today, only about 20 percent of private employees have access to a pension. Instead, they manage their own retirement accounts, like a 401(k). Technology and the availability of information at your fingertips has intrigued many investors to do it themselves. But remember, while investing can be exciting, especially when the market is strong, it’s your future that may be at stake.

Effective management of your investments is critical to the health of your retirement.

A recent trend in investing in Socially Responsible Investing (SRI), an investment strategy in which you invest your money in corporations that align with your beliefs, or avoid those that are known for making unethical business decisions or products.

Socially responsible investing is also known as socially conscious investing, or sustainable, green, or ethical investing. Closely related, there are also investors who have decided to join the Biblically Responsible Investing movement, where investments align with their Christian beliefs.

This type of investing is a great way to promote social and environmental good by financially encouraging companies to be a positive force for change. In this way, your investment helps a company further goals or support causes you care about, like wildlife conservation, racial and gender diversity, clean water, human rights, or religious efforts.

The ability to use your investment to help further goals that align with your values can make investing that much more attractive – and sound that much more fun and exciting. But it’s a bit more complicated than it may sound.

While in theory, you may simply be buying stock in a company that manufactures solar panels, or avoiding investing in a retailer who sells alcohol or pornography, as with typical investment options, it’s important to do your homework, weigh the risks and returns, and maintain a balanced portfolio.

Unfortunately, at PAX Financial Group, we sometimes hear from people who need help after not faring so well investing on their own. Below are 5 common challenges that come with investing.

 

Want to make sound investment decisions? Let’s talk. Schedule a no-obligation conversation with PAX Financial Group to see how we can help.

 

Is it Socially Responsible or Not?

One of the first challenges you’re likely to face as you begin getting into social investing is how to know whether a stock, a company or a fund is really and truly a socially responsible investment. Unfortunately, things are not black and white in that regard, and there is not much in the way of regulation and oversight, because what constitutes a good investment can be subjective and depends on an individual’s values and beliefs. In short, what works for one person may not work for another.

A good example of a subjective “gray area” is Philip Morris International, which manufactures cigarettes but is known for its sustainability efforts and is recognized as a world leader in environmental transparency and performance. If your screening process involves including corporations that make significant environmental efforts, Philip Morris stock might work. But if, on the other hand, you also want to filter out companies that provide products or services that pose risks or may be harmful to people’s health, then you might consider Philip Morris to not be a socially responsible investment.

 

Not Knowing the Risks

There are profitable investments, and there are not-so-profitable investments. If your investments are well-managed, studies have found that a socially responsible investment will perform just as well as other investments. Conversely, if you don’t make good investments, you risk missing out on potential returns, or even losing your investment.

Another risk is possibly leaving money on the table, by screening out entire industries, which may have massive growth and performance potential, because the investor fundamentally disagrees with its products or industry-standard policies.

 

Not Properly Diversifying 

If you’re venturing into DIY investing, you probably know that it’s a risky investment strategy to put all of your eggs in one basket. If you had all your money in one stock and the company went belly-up, your life savings just went up in smoke. Spreading investments out over different stocks and different types of investment products spreads out your portfolio’s level of concentrated risk to a more comfortable balance.

In much the same way, it’s not wise to put your entire net worth into one investment – socially responsible or not. In fact, if you were to employ this type of one-dimensional investment approach and focus only on socially responsible funds, you’d be missing out on other, potentially stronger investment opportunities.

 

Bad Timing 

Timing is a challenge for all types of investing. It’s a natural reaction to want to get in on the action when you see a specific stock performing well. Is there still be money to be made?

So, how do you master timing it just right so that you get in at the stock’s lowest price and sell when it’s at its highest?

No one knows for sure, but it is possible to make smart, realistic decisions with regard to your investments, and a wise way to make them is to remember the market’s cyclical features and to think about your investments’ long-term returns rather than short-term returns.

 

Investing on Your Own, Without Help from a Financial Advisor

All investing, even socially responsible investing, comes with risk, but you don’t have to go into it blindly. If the idea of an investment strategy that enables you to use your money to do double-duty by furthering causes that are important to you, and doing it in a way that increases your wealth, talk to a financial advisor first.

If you’re considering a socially responsible investment, it’s important to make sure not only that the company is in alignment with your values and beliefs, but also that the stock actually has strong potential for profit. You are, after all, making an investment; not a donation.

Don’t make the aforementioned mistakes by going it alone. Whether you’re just starting out or already have a few socially responsible investments in your portfolio, get the peace of mind of having a fiduciary financial advisor (someone who is legally required to put your best interests first) in your corner.

If you’re looking for a fiduciary financial advisor in San Antonio, schedule a no-obligation conversation with PAX Financial Group. We’re here to help.

Retirement Guide - PAX Financial

This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

Darryl Lyons

Darryl Lyons

CEO and co-founder of the PAX Financial Group, Darryl Lyons has been a licensed professional in the financial services industry since 1999. A lifelong Texan, Darryl began his career in the financial sector just one day removed from earning his bachelor’s degree in corporate financial management and accounting at St. Mary’s University. Throughout his career, he has won awards for recruiting and development from Fortune 100 companies. In January 2007, he chose to begin and develop his independent practice. He joined Andres Gutierrez and Joseph Schuetze to form the PAX Financial Group. Darryl also served as the Chairman for Brooks Development Authority. Shortly after his service, Mayor Julian Castro, named a park “The Darryl W Lyons Park” in honor of his service. He was named to the 2010 San Antonio Business Journal’s “40 Under 40 Rising Stars,” which honors people making a difference in business and in the community.

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