MONEY portfolio

5 Ways to Invest Smarter at Any Age

dollar bill lifting barbells
Comstock Images—Getty Images

The key is settling on the right stock/bond mix and sticking to your guns. Here's how.

Welcome to Day 4 of MONEY’s 10-day Financial Fitness program. So far, you’ve seen what shape you’re in, gotten yourself motivated, and checked your credit. Today, tackle your investment mix.

The key to lifetime fitness is a powerful core—strong and flexible abdominal and back muscles that help with everything else you do and protect against aches and injuries as you age. In your financial life, your core is your long-term savings, and strengthening it is simple: Settle on the right stock/bond mix, favor index funds to keep costs low, fine-tune your approach periodically, and steer clear of gimmicks such as “nontransparent ETFs” or “hedge funds for small investors”—Wall Street’s equivalent of workout fads like muscle-toning shoes.

Here’s the simple program:

1. Know Your Target

If you don’t already have a target allocation for your age and risk tolerance, steal one from the pie charts at T. Rowe Price’s Asset Allocation Planner. Or take one minute to fill out Vanguard’s mutual fund recommendation tool. You’ll get a list of Vanguard index funds, but you can use the categories to shop anywhere.

2. Push Yourself When You’re Young

Investors 35 and under seem to be so concerned about a market meltdown that they have almost half their portfolios in cash, a 2014 UBS report found. Being too conservative early on—putting 50% in stocks vs. 80%—reduces the likely value of your portfolio at age 65 by 30%, according to Vanguard research. For starting savers, 90% is a commonly recommended stock stake.

3. Do a U-turn at Retirement

According to Wade Pfau of the American College and Michael Kitces of the Pinnacle Advisory Group, you have a better shot at a secure retirement if you hold lots of stocks when you’re young, lots of bonds at retirement, and then gradually shift back to stocks. Their studies found that starting retirement with 20% to 30% in stocks and raising that by two percentage points a year for 15 years helps your money last, especially if you run into a bear market early on.

4. Be Alert for Hidden Risks

Once you’ve been investing for several years and have multiple accounts, perfecting your investment mix gets trickier. Here’s a simple way to get the full picture of your portfolio.

Dig out statements for all your investment accounts—401(k), IRA, spouse’s 401(k), old 401(k), any brokerage accounts. At Morningstar.com, find “Instant X-Ray” under Portfolio Tools. Enter the ticker symbol of each fund you own, along with the dollar value. (Oops. Your 401(k) has separately managed funds that lack tickers? Use the index fund that’s most similar to your fund’s benchmark.)

Clicking “Show Instant X-Ray” will give you a full analysis, including a detailed stock/bond allocation, a geographic breakdown of your holdings, and your portfolio’s overall dividend yield and price/earnings ratio. Look deeper to see how concentrated you are in cyclical stocks, say, or tech companies—a sign you might not be as diversified as you think or taking risks you didn’t even know about.

5. Don’t Weigh Yourself Every Day

Closely monitoring your progress may help with an actual fitness plan. For financial fitness, it’s better to lay off looking at how you’re doing. A growing body of research finds that well-diversified investors who check their balances infrequently are more likely to end up with bigger portfolios, says Michaela Pagel, a finance professor at Columbia Business School. One reason: Pagel says savers who train themselves not to peek are more likely to invest in stocks. And research by Dalbar finds that investors’ tendency to panic sell in bear markets has cut their average annual returns to 5% over the past 20 years, while the S&P 500 earned 9.2%.

When you have the urge to sell, remind yourself that your time horizon is at least 20 years, says Eric Toya, a financial planner in Redondo Beach, Calif. “Outcome-oriented investors agonize over every up-and-down whim of the market and make poor timing decisions,” he says. “If your process is sound, you don’t need to panic.”

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MONEY Tech

What Apple Watch Means for Apple Stock

Apple CEO Tim Cook speaks about the Apple Watch during an Apple event at the Flint Center in Cupertino, California, September 9, 2014.
Stephen Lam—REUTERS

The Apple Watch will help with revenue growth this year.

The moment is almost here. Unless you live under a rock, you know the Apple APPLE INC. AAPL -1.5% Watch — the first new product since the death of Steve Jobs in 2011 — is about to be released. A new report courtesy of The Wall Street Journal (subscription required) outlines initial sales expectations for the new device. And if these estimates are correct, the unit could have significant implications for year-over-year revenue growth at the company.

Specifically, the Journal references “people familiar with the matter” who claim Apple ordered between 5 million and 6 million units, with half of production earmarked for the low-end Sport model, a third for the mid-tier Apple Watch, and the remainder for the high-end edition.

And while many details are still unconfirmed — most notably the pricing for mid and high-end models — it appears the Apple Watch could be the revenue growth driver the company needs for a typically slow period.

One quarter is not like the others

If the last four quarters are any indication, Apple could use a mid-year revenue boost. The first fiscal quarter (fourth calendar quarter) is where Apple really outperformed, growing revenue nearly 30% year-over-year. Led by the newest iterations of its iPhone, Apple smashed all expectations and propelled the stock to all-time highs.

That said, year-over-year revenue growth each quarter was rather lumpy, with the vast majority of that growth coming from its seasonally heavy first fiscal quarter. The chart below provides some perspective:

As you can see, although Apple grew its total revenue 14.8% over the last four quarters compared with the prior period, the vast majority of revenue growth was attributed to one amazing quarter. As a matter of fact, nearly two-thirds of the total 65.9% top-line growth came from the holiday quarter.

Meanwhile, mid-year performance was less impressive. And while it is important to note that 5% to 6% year-over-year growth is still amazing for a company pushing nearly $200 billion in revenue, a shot in the arm during the seasonally slower quarters should only be an additional catalyst for the stock.

How much revenue growth from the initial production order?

As you can see, one of those “low” growth quarters is the third fiscal quarter that typically starts around April 1st. With an April release expected, the Apple Watch will be most felt during that quarter. Assuming forecasts are correct — the company errs on the conservative side, if anything — the Apple Watch will add roughly 16.8% growth to the quarter year-over-year, holding all other factors constant.

Apple Watch Brand Watch Sport Apple Watch Apple Watch Edition
Units produced at midpoint 2.75 million 1.83 million .92 million
Estimated MSRP $350 $400* $5000*
Total revenue per segment $962.5 million $732 million $4.6 billion
Total revenue $6.3 billion

Source: Wall Street Journal. *Denotes estimate

The estimated $5,000 Apple Edition price point came courtesy of WSJ and was expanded upon by Jon Gruber of Daring Fireball. Mr. Gruber estimates the high-end model has the potential to add the aforementioned $4.6 billion in revenue per quarter — not just with its initial run. If so, the Watch product line would rocket up to nearly $6.3 billion, taking its place as one of the largest product segments after the iPhone. And even better for investors, the aforementioned product/revenue mix should have a positive effect on gross margins.That said, I personally think replicating these results every quarter will be challenging. The Apple Watch should not be an impressive revenue driver in its own right after initial demand is satiated, but it will help with revenue growth this year, managing expectations if the next version of the iPhone — tentatively dubbed the iPhone 6s — does not set fresh records.

Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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TIME stock market

Here’s the Biggest Change in Technology in Recent Memory

Yelp Yelp. If you’re on vacation or new in town (or even not-so-new in town) and you want to learn about what’s around you — shops, restaurants, dry cleaners, gas stations, bars, you name it — Yelp has you covered, complete with user reviews so you can separate the good from the bad.

It's not some new, slick gadget or big idea

With the bulk of the earnings season behind us, the stock market appears to be in a much better mood than it was a month ago. The S&P 500 is up 3.8% over the past month, while the tech-heavy Nasdaq 100 is up an even healthier 5.9%. Tech, it seems, is a popular sector refuge in the sea of uncertainty facing 2015.

But a closer look at the tech earnings from the past month shows a more complex story as not all tech names are being favored equally. In fact, some of the companies that dished out disappointing forecasts were hammered hard. If there is one key trend that emerged from the recent parade of fourth-quarter earnings, it’s that 2015 is turning into a stockpicker’s market for tech shares.

This is in contrast to the past couple of years, when waves of enthusiasm or caution swept across the tech sector at large. Last year, for example, an early rally for tech led to concerns that another bubble would emerge–concerns that were quickly dispelled by a brutal selloff come April. By June, stocks were recovering, and the Nasdaq 100 ended last year up 18.5% and the S&P 500 up 11.8%.

One trend from 2014 that’s continuing into this year is the outperformance of larger-cap tech stocks. Smaller tech shares tend to do well in the several months following their IPOs, then have a harder time pleasing investors. A good example is GoPro, which went public at $24 a share in June, surged as high as $98 in October and and fell back to $43 last week in the wake of its earnings report.

GoPro’s post-earnings performance illustrates the selective mood of investors. The company blew past analyst expectations with revenue growth of 75% and higher profit margins. But the stock plummeted 15% the following day as analysts raced to lower price targets. Why? GoPro’s outlook was seen as too weak to support its lofty valuation and its chief operating officer was leaving.

That pattern played out in other smaller tech companies. Yelp slid 20% after its own earnings report that beat forecasts but that showed worrisome signs of slower growth and slimmer profits this year. Pandora fell 17% to a 19-month low after disappointing revenue from the holiday quarter. Zynga finished last week down 18% after warning this quarter will be much slower than expected.

What all of these companies also have in common are uncomfortably high valuations. Even after the post-earning selloff, GoPro is trading at 37 times its estimated 2015 earnings. Pandora is trading at 75 times its estimated earnings, while Yelp is trading at an ethereal 371 times. The S&P 500 has an average PE of just below 20.

So which companies did the best this earnings season? As a rule, it was big cap names serving the consumer market: Apple, Twitter, Amazon and Netflix. What these four companies have in common beyond strong earnings last quarter is that all were seen as struggling by investors during some or all of 2014.

Compare them to big-cap tech names that posted decent financials in the fourth quarter but that weren’t seen as struggling before, but instead were seen as thriving tech giants. Google, for example, is up 6% over the past month, while Facebook is up 1%. Both are enjoying steady growth that was so consistent with their past performance it has a ho-hum quality to it.

By contrast, Apple, which had been portrayed by critics as a gadget giant past its prime, has seen its stock rally 21% in the past month to a $740 million market cap, the first US company to be worth more than $700 billion. Amazon, which investors feared would suffer prolonged losses because of its expansion plans, is up 29%. So is Twitter, another object of investor worry in 2014. Netflix, a perennial target of bears, is up 40%.

So what have we learned about the technology sector so far this year? On the whole, investors are favoring tech stocks in a world of uncertainty – where negative interest rates have become bizarrely commonplace, and where the next market crisis could come from a crisis involving the Euro’s value, or China’s economy, or oil’s volatility, or Russia’s military aggression.

But at the same time, investors have grown more selective about the tech names they invest in. They might snap up hot tech IPOs, but they’ll drop them quickly if those companies can’t deliver over time. They prefer big tech, especially companies that cater to consumers. And if those tech giants can engineer a turnaround, they’re golden.

TIME Innovation

Five Best Ideas of the Day: February 18

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. More than a decade ago, the international community tackled AIDS in Africa. Now we should do the same with cancer in the developing world.

By Lawrence N. Shulman in Policy Innovations

2. Finally, an app for kids to anonymously report cyber-bullying.

By Issie Lapowsky in Wired

3. Indians in the U.S. sent $13 billion home last year. A new plan aims to push some of that money into social good investments in India.

By Simone Schenkel in CSIS Prosper

4. Websites are just marketing. The next Internet is TV.

By John Herrman in The Awl

5. The U.K. may set up a digital court to settle small claims online.

By Chris Baraniuk in New Scientist

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY retirement planning

What Women Can Do to Increase their Retirement Confidence

150212_FF_WOMENDONTTALK
Izabela Habur—Getty Images

Knowing how much to save and how to invest can help women feel more secure. Here's a cheat sheet.

Half of women report feeling worried about having enough money to last through retirement, according to a new survey from Fidelity Investments of 1,542 women with retirement plans.

Those anxieties aren’t necessarily misplaced either.

Women have longer projected lifespans than men and even if married, are likely to spend at least a portion of their older years alone due to widowhood.

“So they need larger pots of money to ensure they won’t outlive their savings,” says Kathy Murphy, president of personal investing at Fidelity.

Earlier research by the company found that while women save more on average for retirement (socking away an average 8.3% of their salary in 401(k)s vs. 7.9% for men) they typically earn two-thirds of what men do and thus have smaller retirement account balances ($63,700 versus $95,800 for men).

Also, while women are more disciplined long term investors who are less likely than men to time the market, women are also more reluctant to take risk with their portfolios, says Murphy.

“And if you invest too conservatively for your age and your time horizon, that money isn’t working hard enough for you,” she adds.

How Women Can Increase their Confidence

Financial education can help women reduce the confidence gap, and get to the finish line better prepared, says Murphy.

According to the Fidelity survey, some 92% of women say they want to learn more about financial planning. And there’s a lot you can do for free to educate yourself, notes Murphy. As an example, she notes that many employers now offer investing webinars and workshops for 401(k) participants.

You might also start by reading Money’s Ultimate Guide to Retirement for the least you need to know about retirement planning, in digestible chunks of plain English. In particular, you might check out the piece on figuring out the right mix of stocks and bonds, to help you determine if you’re being too risk averse.

Also, simply calculating how much you need to save for the retirement you want—using tools like T. Rowe Price’s Retirement Income Planner—can help you make plans and feel more secure.

The 10-minute exercise can have a powerful payoff: The Employee Benefit Research Institute regularly finds in its annual Retirement Confidence Index that people who even do a quick estimate have a much better handle on how much they need to save and are more confident about their money situation. Also, according to research by Georgetown University econ professor Annamaria Lusardi, who is also academic director of the university’s Global Financial Literacy Excellence Center, people who plan for retirement end up with three times the amount of wealth as non-planners.

Says Murphy, “We need to let women in on the secret that investing isn’t that hard.”

More from Money.com’s Ultimate Guide to Retirement:

MONEY Markets

Oil Prices: Freaking Investors Out for 150 Years and Counting

Oil derricks moving up and down
Getty Images

The entire oil and gas industry has pretty much maneuvered from crisis to crisis since its inception.

Whenever I read or watch financial media coverage of oil prices lately, the image that comes to mind is a bunch of kids who just ate half their weight in candy, washed it down with a gallon of Red Bull, and then run around the playground at warp speed. They both move so fast and sporadically that is almost impossible to keep up with them.

Here is just a small example of headlines that have been found at major financial media outlets in just the past week:

  • Citi: Oil Could Plunge to $20, and This Might Be ‘the End of OPEC’
  • OPEC sees oil prices exploding to $200 a barrel
  • Oil at $55 per barrel is here to stay
  • Gas prices may double by year’s end: Analyst

What is absolutely mind-boggling about these statements is that these sorts of predictions are accompanied with the dumbest thing that anyone can say about commodities: This time it’s different.

No it’s not, and we have 150 years worth of oil price panics to prove it.

Oil Prices: From one hysterical moment to another

The thought of oil prices moving 15%-20% is probably enough to make the average investor shudder. The assumption is that when a move that large happens, something must be wrong with the market that could change your investment thesis. Perhaps the supply and demand curves are a little out of balance, maybe there is a geopolitical conflict that could compromise a critical producing nation.

Or maybe, just maybe, it’s just what oil prices do over time.

Ever since 1861 — two years after the very first oil well was dug in the U.S. — there have been:

  • 88 years with a greater than 10% change, once every year and a half
  • 69 years with a greater than 15% change, or once every 2.25 years
  • 44 years with a greater than 25% change, once every 3.5 years
  • 13 years with a greater than 50% change, once every dozen years or so

Also keep in mind, these are just the change in annual price averages. So it’s very likely that these big price pops and plunges are even more frequent than what this chart shows.

Investing in energy takes more stomach than brains

It’s so easy to fall into the trap of basing all of your energy investing decisions on the price of oil and where it will go. On the surface it makes sense because the price of that commodity is the lifeblood of these companies. When the price of oil drops as much as 50% over a few months, it will likely take a big chunk out of revenue and earnings power.

As you can see from this data, though, the frequency of major price swings is simply too much for the average investor to try to time the market. Heck, even OPEC, the organization that is supposed to be dedicated to regulating oil prices through varying production is bad at predicting which way oil prices will go.

The reality is, being an effective energy investor doesn’t require the skill to know where energy prices are headed — nobody has that skill anyways. The real determining factor in effectively investing in this space is identifying the best companies and holding them through the all the pops and drops.

Let’s just use an example here. In 1980, the price of oil — adjusted for inflation — was at a major peak of $104. From there it would decline for five straight years and would never reach that inflation adjusted price again until 2008. For 15 of those 28 years oil prices were one-third what they were in 1980. If we were to use oil prices as our litmus test, then any energy investment made in 1980 would have been a real stinker.

However, if you had made an investment in ExxonMobil in 1980 and just held onto it, your total return — share price appreciation plus dividends — would look a little something like this.

XOM Total Return Price Chart

So much for all those pops and drops.

What a Fool believes

The entire oil and gas industry has pretty much maneuvered from crisis to crisis since its inception, we just seemed to have forgotten that fact up until a few months ago because we had two years of relative calm. The important thing to remember is that the world’s energy needs grow every day and the companies that produce it will invest and make more money off of it when prices are high and less money when prices are low.

Based on the historical trends of oil, analysts will continue to go on their sugar-high proclamation streak and say that oil will go to absurd highs and lows so they can get their name in a financial piece, and they will try to tell you that this time it’s different because of xyz. We know better, and they should as well.

There’s 150 years of evidence just waiting to prove them wrong.

MONEY IRAs

The Retirement Investing Mistake You Don’t Know You’re Making

The investor rush to beat the April 15 deadline for IRA contributions often leads to bad decisions. Here's how to keep your investments growing.

It happens every year around this time: the rush by investors to make 11th-hour contributions to their IRAs before the April 15 tax deadline.

If you’ve recently managed to send in your contribution, congrats. But next time around, plan ahead—turns out, this beat-the-clock strategy comes at a cost, or a “procrastination penalty,” according to Vanguard.

Over 30 years, a last-minute IRA investor will wind up with $15,500 less than someone who invests at the start of the tax year, assuming identical contributions and returns, Vanguard calculations show. The reason for the procrastinator’s shortfall, of course, is the lost compounding of that money, which has less time to grow.

Granted, missing out on $15,500 over 30 years may not sound like an enormous penalty, though anyone who wants to send me a check for this amount is more than welcome to do so. But lost earnings aren’t the only cost of the IRA rush—last-minute contributions also lead to poor investment decisions, which may further erode your portfolio.

Many hurried IRA investors simply stash their new contributions in money-market funds—a move Vanguard calls a “parking lot” strategy. Unfortunately, nearly two-thirds of such contributions are still stashed in money funds a full 120 days later, where they have been earning zero returns. So what seems like a reasonable short-term decision often ends up being a bad long-term choice, says Vanguard retirement expert Maria Bruno.

Why are so many people fumbling their IRA strategy? All too often, investors focus mainly on their 401(k) plan, while IRAs are an after-thought. But fact is, most of your money will likely end up in an IRA, when you roll out of your 401(k). Overall, IRAs collectively hold some $7.3 trillion, the Investment Company Institute (ICI) found, fueled by 401(k) rollovers—that’s more than the money held in 401(k)s ($4.5 trillion) and other defined-contribution accounts ($2.2 trillion) combined.

Clearly, having a smart IRA plan can go a long way toward improving your retirement security. To get the most out of your IRA—and avoid mistakes—Bruno lays out five guidelines for investors:

  • Set up your contribution schedule. If you can’t stash away a large amount at the start of the year, establish a dollar-cost averaging program at your brokerage. That way, your money flows into your IRA throughout the year.
  • Invest the max. You can save as much as $5,500 in an IRA account in 2015. But for those 50 and older, you can make an additional tax-deferred “catch up” contribution of $1,000. A survey of IRA account holders by the ICI found that just 14% of investors take advantage of this savings opportunity. (You can find details on IRS contribution limits here.)
  • Select a go-to fund. Skip the money fund, and choose a target-date retirement fund or a balanced fund as the default choice for your IRA contributions. You can always change your investment choice later, but meantime you will get the benefits—and the potential growth—of a diversified portfolio.
  • Invest in a Roth IRA. Unlike traditional IRAs, which hold pre-tax dollars, Roths are designed to hold after tax money, but their investment gains and later payouts escape federal income taxes. With Roths, you also avoid RMDs (required minimum distributions) when you turn 70 ½, which gives you more flexibility. Vanguard says nine out of every 10 dollars contributed to IRAs by its younger customers under age 30 are flowing into Roths. Here are the IRS rules for 2015 Roth contributions.
  • Consider a Roth conversion. High-income earners who do not qualify for tax-deferred Roth contributions can still make post-tax contributions to an IRA and then convert this account to a Roth. The Obama Administration’s proposed 2016 federal budget would end these so-called backdoor Roth conversions, which have become very popular. Of course, it’s far from clear if that proposal will be enacted.

Once you have your IRA set up, resist tapping it until retirement. The longer you can let that money ride, the more growth you’re likely to get. Raiding your IRA for anything less than real emergency would be the worst mistake of all.

Philip Moeller is an expert on retirement, aging, and health. His latest book is “Get What’s Yours: The Secrets to Maxing Out Your Social Security.” Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: 25 Ways to Get Smarter About Money Right Now

MONEY stocks

How I Plan for the Stock Market Freakout…I Mean Selloff

150217_ADV_StockFreakout
Mike Segar—REUTERS A trader works on the floor of the New York Stock Exchange (NYSE).

Advising people not to dump their stocks in downturn is easy. Actually persuading them not to do so is harder.

I got an email from Nate, a client, linking to a story about the stock market’s climb. “Is it time to sell?” he asked me. “The stock market is way up.”

Hmmmm.

If I just tell Nate, “Don’t sell now,” I think I might be missing something.

At a recent conference, Vanguard senior investment analyst Colleen Jaconetti presented research quantifying the value advisers can bring to their clients. According to Vanguard’s research, advisers can boost clients’ annual returns three percentage points — 300 basis points in financial planner jargon. So instead of earning, say, 10% if you invest by yourself, you’d earn 13% working with an adviser.

That got my attention.

Jaconetti got more granular about these 300 basis points. Turns out, much of what I do for clients — determining optimal asset allocations, maximizing tax efficiency, rebalancing portfolios — accounts for about 1.5%, or 150 basis points.

The other 150 basis points, or 1.5%, comes from what Jaconetti called “behavioral coaching.” When she introduced the topic, I sat back in my seat and mentally strapped myself in for a good ride. One hundred fifty basis points, I told myself — this is going to be advanced. Bring it on!

Then she detailed “behavioral coaching.” I’m going to paraphrase here:

“Don’t sell low.”

Don’t sell low? Really? The biggest cliché in the world of finance? That’s worth 150 basis points?

But it isn’t just saying, “Don’t sell low.”

It’s actually that I have the potential to earn my 150 basis points if I can get Nate to avoid selling low. That means I need to change his behavior. Wow. Didn’t I give up trying to change other people’s behavior January 1?

Inspired by Nate and the fact that the stock market is high (or maybe it’s low; the problem is we don’t know), I decided to think like a client might think and do a deeper dive into the research. Why not sell now? Why do people sell low? How can I influence, if not change, client behavior? I’ve got nothing to lose and clients have 1.5% to gain.

One interesting thing I learned in my research: Not everybody sells. In another study, Vanguard reported that 27% of IRA account holders made at least one exchange during the 2008-2012 downturn. In other words, 73% of people didn’t sell.

Current research on investing behavior, called neuroeconomics, includes reams of studies on over-confidence, the recency effect, loss aversion, herding instincts, and other biases that cause people to sell low when they know better.

Also available are easy-to-understand primers explaining why it’s such a bad idea to get out of the market.

The question remains, “How do I influence Nate’s behavior?” The financial research ends before that gets answered.

Coincidentally, I recently had a tennis accident that landed me in the emergency room. While outwardly I was calm, cracking lame jokes, inwardly I was freaked out.

Despite my appearance, the medical professionals assumed I was in high anxiety mode, treating me appropriately. The emergency room personnel had specific protocols. Quoting research and approaching panicked people with logic weren’t among them.

They answered my questions with simple sentences and gave me some handouts to look at later.

Selling low is an anxiety issue. And anxiety about the stock market runs on a continuum:

Anxiety Level Low Medium High
Client behavior Don’t notice the market Mindfully monitor it. “Stop the pain. I have to sell.”

That brought me to a plan, which I’m implementing now, to earn the 150 basis points for behavioral coaching.

During normal times, when clients are in the first two boxes, I make sure to reiterate the basics of low-drama investment strategy.

When I get a call from clients in high anxiety mode, however, I follow a protocol I’ve adapted from the World Health Organization’s recommendations for emergency personnel. Seriously. Here’s what to do:

  • Listen, show empathy, and be calm;
  • Take the situation seriously and assess the degree of risk.
  • Ask if the client has done this before. How’d it work out?
  • Explore other possibilities. If clients wants to sell at a bad time because they need cash, help them think through alternatives.
  • Ask clients about the plan. If they sell now, when are they going to get back in? Where are they going to invest the proceeds?
  • Buy time. If appropriate, make non-binding agreements that they won’t sell until a specific date.
  • Identify people in clients’ lives they can enlist for support.

What not to do:

  • Ignore the situation.
  • Say that everything will be all right.
  • Challenge the person to go ahead.
  • Make the problem appear trivial.
  • Give false assurances.

Time for some back-testing. How would this have worked in 2008?

In 2008, Jane, who had recently retired, came to me because her portfolio went down 10%. The broader market was down 30-40%, so I doubt her old adviser was concerned about her. Jane, however, didn’t spend much and had no inspiring plans for her estate. She hated her portfolio going down 10%.

Jane didn’t belong in the market. She didn’t care about models showing CD-only portfolios are riskier. She sold her equity positions. She lost $200,000!

The protocol would have worked great because we could have worked through the questions to get to the root of the problem. Her risk tolerance clearly changed when she retired. She and her adviser hadn’t realized it before the downturn.

Then there was Uncle Larry.

Like a lot of relatives, although he may ask my opinion on financial matters, Larry has miraculously gotten along well without acting on much of it.

Larry is in his 80s and mainly invested in individual stocks. This maximizes his dividends, which he likes. The problem was that his dividends were cut. The foibles of a too-big-to-fail bank were waking him up at 3:00 a.m. Should he sell?

When he called, I suggested that Uncle Larry look at the stock market numbers less and turn off the news that was causing him anxiety. I reassured him that he wouldn’t miss anything important. We discussed taking some losses to help him with his tax situation.

Although he listened, I didn’t get the feeling this advice was for him. Actually, the emergency protocol would predict this; the protocol doesn’t include me giving advice!

Uncle Larry and I discussed his plan. He ended up staying in the market because he couldn’t come up with an alternative. He also thought, “If I had invested in a more traditional way, I’d probably have ended up at the same point that I am at now anyway. So this is okay.”

He’s now thrilled he didn’t sell and, at 87, is still 100% in individual stocks.

MONEY the photo bank

An Artist Mints Her Own Take on Bitcoin

How one photographer is using digital currency to rethink the value of money and art.

Virtual currency like Bitcoin has captured the imagination of a lot of people, from techies to economists to drug dealers. Now, artists are riffing on the idea, and one is trying to use it to fund her work—and to raise some new questions about what makes both money and art precious.

Sarah Meyohas, a Wharton School of Business grad who is currently finishing up her MFA in Photography at Yale University, is launching her own digital currency, which she calls, cheekily, BitchCoin. (“If you’re a woman who is taking a stake in your future and aggressive, you’re a bitch,” says Meyohas.) Unlike Bitcoin, which is computer-generated by its users, BitchCoin represents a claim on a tangible asset, in this case Meyohas’ photographic prints. One virtual coin is supposed to correspond to 25 square inches of print. Each time Meyohas creates a coin, she’ll set aside a print in bank vault.

BitchCoin will be “mined” inside of Where, a gallery/shipping container in Brooklyn. Meyohas will be camped inside producing her work, while being streamed live via a webcam. Coin buyers will receive a certificate with key number encryption allowing access to an account on a free BitchCoin software program in which BitchCoins can be sent and received.

At one level, this is really just a clever take on crowdfunding art, similar to Kickstarter, IndieGogo and the relatively new Fotofund. The initial BitchCoins will sell for $100 each, and that money goes to Meyohas. But she also says the project is about “the role of value in reproducible objects like the photograph.” And about the value of money. Since the end of the gold standard, regular money is just pieces of paper with pictures, backed by nothing. Meyohas describes BitchCoin as a virtual currency backed by a real asset, the art. But that art, of course, is just pieces of paper with a pictures. That paradox is especially relevant to her own medium. As Meyohas puts it:

For a long time, the art world wouldn’t seriously collect photographs because they seemed too reproducible. It was only once printed and editioned, made materially scarce, that they could be valued. There is something about the value of money which you can print endless copies of that parallels the photographic print.

Meyohas is also exploring where the value of an artist’s work should be placed, on individual pieces or on her entire body of work. Unlike crowdfunding or indeed traditional art buying, in which a patron invests in a specific project or publication, BitchCoin is supposed to represent a piece of Meyohas simply “as a ‘value producer’.” Meyohas says a BitchCoin is exchangeable not for a specific photo, but for any of her “editioned, unframed archival chromogenic photographs.” She believes this approach gives her more of a controlling stake in her art and career; if her career is successful and her works grow in value, she can tap into that by creating new, more valuable coins.

By getting buyers to support a career, not merely one work, she’s harkening back to an older type of arts patronage. In the fifteenth and sixteenth centuries, the Florentine House of Medici which controlled Europe’s largest bank and thus exerted unrivaled social and political influence over the region—used their wealth to underwrite art, architecture, literary and scientific projects. They supported the careers of those geniuses lucky enough to be aligned with their inner circle: Michelangelo, Donatello, Leonardo, Raphael, Galileo, Brunelleschi and Vasari—among others.

This Sunday, February 15, at 8 p.m., Meyohas will be launching BitchCoin at the Trinity Place Bar, a bar in a bank (of course) at 115 Broadway, in the Financial District of Manhattan. At its initial offering, BitchCoin will back the edition of one photograph, aptly titled “Speculation.” Afterward, the exchange rate will fluctuate based on demand for BitchCoin, and of course the value of Meyohas’ artwork in the market.

Virtual currencies are wildly speculative, and buying art is all the more so. And the idea of BitchCoin as a store of value is, well… complicated. If you see BitchCoin as really a part of Meyohas’ artwork, what would it even mean to try to trade it for 25 square inches of her pictures? Since she says a BitchCoin would be destroyed whenever it was converted to art, wouldn’t that in turn destroy part of the art, and part of its value? Prompting such knotty, unanswerable questions is of course what Meyohas is up to with this project.

This is part of The Photo Bank, a recurring feature on Money.com dedicated to conceptually-driven photography. From images that document the broader economy to ones that explore more personal concerns like paying for college, travel, retirement, advancing your career, or even buying groceries, The Photo Bank showcases a spectrum of the best work being produced by emerging and established artists. Submissions are encouraged and should be sent to Sarina Finkelstein, Online Photo Editor for Money.com at sarina.finkelstein@timeinc.com.

MONEY Careers

The Stock Market Is No Place for Millennials

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Roberto Westbrook—Getty Images

Investing in yourself, not the S&P 500, often makes more sense for young adults.

When most people think of investing, they think of the stock market. But that is rarely the best place for young professionals to invest their hard-earned money. Instead, they need to be investing in themselves.

You’ve undoubtedly heard that it’s important to start investing early for retirement. Whoever tells you that will most likely mention the concept of compound returns, as well.

Compound returns are great. Heck, it’s widely repeated that compound interest is the eighth wonder of the world. But I’m not sold on the stock market strategy for twentysomethings with limited cash flow.

Most recent graduates come out of school filled with theoretical knowledge about their major. Although this knowledge can be useful at times, it is often a challenge to apply it to real-world situations. It’s kind of like dudes with “beach muscles”: They hit the gym hard every day so they can look great on the beach. If they ever get into an altercation and actually have to use their strength, though, they fail miserably. That’s because they have no practical experience.

The same goes for theoretical knowledge in the real world.

We never learn about life in college. We don’t learn how to make or manage our money. We are not taught how to communicate effectively or be a leader. And we certainly do not get trained on how to create happiness and love in our lives. These are the valuable things we need to learn, yet we get thrown out into the world to fend for ourselves. So we have to take it upon ourselves to learn and grow organically after college.

The good news is there are plenty of programs, courses, and seminars that actually teach this stuff. But they cost money.

It’s this type of education that I am referring to when I say that young professionals need to invest in themselves. The notion that the stock market will set you free (in retirement) is only half right. It does not take into account myriad possibilities, one of which is that investing in yourself early in your career may be a better choice.

Let’s assume that you start out making $50,000 a year and indeed have a choice. Here are two simplified scenarios:

Option 1: You invest in a taxable investment account every year from the age of 25 to 50, starting with $5,000, or 10% of your first-year salary. Both your salary and your yearly retirement contribution grow 3% annually throughout your career. In year five, you’ll be making nearly $58,000 annually, and you’ll be putting $5,800 away toward your retirement. And assuming the investment vehicle has a 7% compound annual growth rate, you’ll have $350,836, after taxes, in 25 years.

Option 2: You take that initial $5,000 and invest in yourself every year for five years. You choose to attend various training programs covering the areas of leadership, communication, and other practical skills that you can put to use immediately. You gain life knowledge, allowing you to perform better and maybe even connect with a career about which you are passionate. As such, your income increases by 50% over five years — to $75,000 — rather than simply inching up by 3% per year to $58,000. Then, in year five, you start contributing about $17,000 per year to your retirement ($5,800 plus all the extra money you’re earning, after taxes). Projecting forward 20 years using the same rates for contribution growth and investment returns as in Option 1, you’d end up with $829,635 after tax.

After playing out both scenarios above, we can see that Option 2 leaves you with $479,000 more than Option 1 does.

Certainly, I have made a few assumptions — one of which is that you invest all your extra earnings in Option 2 rather than raise your standard of living. And there is no guarantee that by investing in ourselves, we will increase our income. However, this same argument can be made for investing in the stock market. The difference is that by investing in ourselves, we maintain control over that investment. It’s up to us to learn necessary life skills to excel at whatever we choose as a career or life mission.

On the other hand, when we hand over our money to the stock market, we give away that control, basing all results on historical averages. I’m a big proponent on focusing on what we can control. And, as young professionals, our biggest asset is our human capital, or our ability to earn income. Why not focus here first, and save the investing for tomorrow, when our cash flow is at a much healthier level?

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Eric Roberge, CFP, is the founder of Beyond Your Hammock, where he works virtually with professionals in their 20s and 30s, helping them use money as a tool to live a life they love. Through personalized coaching, Eric helps clients organize their finances, set goals, and invest for the future.

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