Are You an Optimistic Investor?

Being generally optimistic about life can be good for your mental and physical health. Unfortunately, being an optimistic investor can sometimes have a negative affect on your financial health.

The markets have done well since March 2009 yet many retirement nest eggs are still suffering from what happened before then. The optimist might go all in on this market run-up, hoping to make a full recovery and then some.

That, my fellow baby boomers, can mean taking too much risk. If the markets reverse during your wave of optimism, you can cause even more damage to your retirement portfolio. You might never recover from that.

To prevent that from happening, it helps to read some doom and gloom economic predictions. This is a form of  ”keeping it real,” to borrow a phrase from the younger generation. One of my favorite financial writers – Paul Farrell at MarketWatch – has done us a favor by compiling such predictions from twelve different sources. They vary in degree of pessimism. One writer even suggests preparing for a “head for the hills” economic collapse scenario. We sort of did that when we made preparations for a bird flu pandemic.

I don’t agree with all of the negativity but I enjoy reading it. It serves as a warning about what could happen. At our age, baby boomers should be focused on financial risk management. So be optimistic about life but try to moderate that optimism when it comes to your money.

Are you an optimistic investor in 2010?

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