Hope, Greed, Fear and Your Finances

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3. Ask questions and engage in the process. Although investors are sometimes timid about asking questions of financial professionals, Foss says in Wealthy by Design that two questions are essential right out of the gate: Are you a fiduciary? and How do you get paid for managing my assets? What does that mean? The dictionary defines a fiduciary as “an individual, corporation or association holding assets for another party, often with the legal authority and duty to make decisions regarding financial matters on behalf of the other party.” Investors need to be honest with their advisors if they don’t understand or if their personal circumstances change. In return, the advisor must listen to clients’ concerns.

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9. Choose a trustworthy advisor. A financial advisor is like a coach, Foss says. "Once clients jump into the market and the games begin, anything can happen. Some moments will be elating, and there will be surprises, too. As they say, past performance is no guarantee of future results.” A good advisor helps clients develop a game plan that prepares for the unexpected and helps them move confidently forward to reach their goals. Find an advisor who is trustworthy. “You want to know, without question, that your advisor has the expertise and commitment to look out for your interests. If you know that and if you have developed a plan with clear future goals, you’ll stay energized when others feel exhausted by market volatility -- and remain rational when others are irrationally exuberant.”

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10. Stay the course. In the wake of the Great Recession that caused so many investors to abandon ship and cash out their accounts at rock bottom, Foss recommends a well-conceived and disciplined strategy. “Some people have the idea that such a focused design is restricting or that it results in missed opportunities. But it really works in the opposite way. You aren’t distracted by the ‘noise’ that so easily sidetracks other investors. Disciplined investors stay invested, stay the course and reap the benefits. Undisciplined investors jump in and out in a vain attempt to capture the latest hot stock -- and they invariably achieve inferior returns. Research backs this up. If there’s a way to sum up my advice, it’s: Stay diversified and stay the course."