For the American investor, the last couple of years have been unnerving. I'm continually asking myself how the individual investor can keep the faith and stay afloat in this clearly unstable and unpredictable worldwide economy.
The American Psychological Association reports that nearly a third of 45- to 65-year-olds are extremely stressed. The Principal Financial Well-Being Index Summary First Quarter 2010 reports that "two-thirds of employees are very concerned about their long-term financial future, slightly less than fourth quarter of 2009 (71%).
Nearly the same percentage of retirees (64%) is very concerned about their long-term financial future, up significantly from fourth quarter 2009 (56%)." Not surprisingly, Financial Finesse, a trends research company based in California, reports that proactive interest in money management and debt management also increased from the fourth quarter to the first quarter of 2010.
It's a scary economic climate for the average investor. How does one create realistic financial goals that may include a new home, the children's education and retirement in an economic environment that is so full of land mines?
How does the average investor reconcile what's going on all around him and still have the composure to stay the course? By adopting a diversified portfolio that can weather many storms.
"We need to take measures now to protect ourselves against the next tumultuous financial cycle," advises Brian Rogers, chairman and chief investment officer for T. Rowe Price. "We do this by not overextending ourselves financially, remaining well-diversified, keeping our own tolerance for risk at the forefront of our investment decisions, and establishing a long-term investment strategy that makes sense to us in all market environments."
The average investor is your employee. He is the one who's stressed because his plans and future have been shaken at their roots.
Furthermore, he doesn't know when it's going to all end. This employee wants to do a bang-up job for you, but outside influences eat into his productivity and his ability to contribute to your company's bottom line. He needs your help.
Every penny you invest in assisting him will come back to you in increased productivity and employee goodwill. As such, I suggest HR/benefits professionals:
* Make sure employees are aware of their employee assistance program and encourage them to use it. Companies with EAPs have a long history of low employee utilization. Get what you pay for and have your employees seek financial support from the experts in your EAP.
* Get your money's worth from your 401(k) provider. Have them bring in financial training sessions that go beyond basic education. Some providers already have this training available.
* Look for trained expert resources internally to deliver financial training. If you don't have such resources, seek outside assistance or create a train-the-trainer program and have your own employees trained and capable of delivering personal finance education.
* Seek out reputable investment managers and financial planners that are willing to deliver finance fundamentals training at low or no cost. Make sure they limit their sales pitch to those employees that voluntarily seek their support after normal work hours.
* Ensure all training takes a long-term investment approach, emphasizing age-appropriate allocation and diversification, the need to rebalance periodically, the importance of self-discipline as it relates to saving and investing, the magic of compound interest, having a spending plan and an emergency fund, and the value of setting goals.
Workforce Management's Lori Lucas sums it up nicely: "People's retirement dreams have been dented, or worse, and getting back on track won't be easy. Ongoing market volatility may feel overwhelming, and the possibility of more losses may seem unbearable. No one knows when the market and the economy will turn around; however, employees are likely to be more loyal to an employer that sought to help them through troubled times."
Contributing Editor Wayne Hanson, SPHR, CEPF, is an HR consultant with a special interest in financial literacy. He has provided support to the private sector in a number of different capacities.
