Savvy Tips to Help Shell-Shocked Investors Sleep Better

Nervous investor
Nervous investor

After getting hammered by the financial crisis two years ago, investors are finally showing signs of crawling out of their shells again. Stocks have slowly crawled back to levels last seen before the Lehman Brothers collapse in 2008, and safer assets like bonds are seeing major selling pressure as risk appetite returns to the market.

But even as the bunker mentality that prevailed during the depths of the crisis fades, investors are likely to carry some permanent scars. The view of stocks as an easy way to make money that held sway during a remarkable 20-year bull market until the last stomach-churning decade may never return.

Never Buy Another Stock Again, David Gaffen
Never Buy Another Stock Again, David Gaffen

While the prior era spawned countless get-rich-quick schemes, the crash of 2008 seems to have instilled a much more sober approach to investing. And a smart new book called Never Buy Another Stock Again: The Investing Portfolio that Will Preserve Your Wealth and Your Sanity, by David Gaffen, markets editor at Thomson Reuters, will be a valuable read for general investors who are maintaining a cautious bent.

The book is engagingly written but still provides a rigorous overview of markets and investment strategy. Gaffen's point of view is clear when he walks readers through a myriad of popular assets classes like stocks, bonds, exchange-traded funds (ETFs) and commodities. But it stops short of the facile explanations or over-the-top punditry that mar books aimed at broad, generalist audiences. Gaffen's balanced, accessible tone should serve readers who look to the market for solid investments rather than for speculative killings.

"We Got Spoiled"

Gaffen tends to present both sides of a story. While outlining the role that commodities can play as part of an overall portfolio, for example, he still rightly mocks some brokerage ads that present the highly volatile asset class as an easy way to make money for investors struggling with stock-picking.

The days of individual investors easily picking stocks for big gains as a rising tide lifted all boats may truly be a thing of the past. "During a long bull market, people could convince themselves they were very good at stock-picking," Gaffen writes. "We got spoiled, and those habits are going to be hard to change."

Instead, he emphasizes basics like making sure costs are low for investments like mutual funds and ETFs, and he focuses on diversification. Many investors are likely to have heard tidbits of this advice before. But Gaffen's book makes for a timely and lively overview anyway.

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Nor does Gaffen deny that the speculating in stocks can be fun. "The 'pro sports' aspect is cool and part of what I love about markets," he says. But he urges investors to be realistic about their odds and to understand the risks they're taking. Speculative funds, he notes, shouldn't be confused with retirement savings.

"If you revel in the stress and getting a stock right makes your day, that is one thing," he says. "But that is not what you should be doing with your entire savings."

As a new year approaches, a growing number of Wall Street luminaries are now taking a markedly optimistic stance. But the last decade has been nerve-racking nonetheless. Many investors will understandably be looking for peace of mind as much as higher returns, and Gaffen's book can help them achieve both.