market, mutual funds, exchange-traded funds, or your own or some else’s
small business. Or you can pay down mortgage debt more quickly. What
makes sense for you depends on your goals as well as your personal preferences. If you detest risk-taking and volatile investments, paying down your
mortgage, as recommended earlier in this chapter, may make better sense
than investing in the stock market.
To determine your general investment tastes, think about how you would
deal with an investment that plunges 20 percent, 40 percent, or more in a
few years or less. Some aggressive investments can fall fast. You shouldn’t go into the stock market, real estate, or smallbusiness investment arena if such a drop is likely to cause you to sell low or
make you a miserable, anxious wreck. If you haven’t tried riskier investments
yet, you may want to experiment a bit to see how you feel with your money
invested in them.
A simple way to “mask” the risk of volatile investments is to diversify your
portfolio — that is, to put your money into different investments. Not watching prices too closely helps, too — that’s one of the reasons real estate investors are less likely to bail out when the market declines. Stock market
investors, unfortunately from my perspective, can get daily and even minuteby-minute price updates. Add that fact to the quick phone call or click of your
computer mouse that it takes to dump a stock in a flash, and you have all the
ingredients for short-sighted investing — and potential financial disaster.
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