“Oh, I’d pick the one with the fancy car,” replied Mimi, a member of my investment club, in response to a question I had asked the group about choosing an investment advisor. I could not believe my ears! I had asked if they would choose the advisor in the fancy suit with the expensive BMW or the advisor with the well-worn handbag and a Honda CRV. Had I taught these ladies nothing?

My son, George (in sunglasses, no cap), rowing bow for the Susquehanna Crew.

Crew is an amazing sport. It works almost every muscle in the human body and requires a tremendous coordinated team effort. In most other sports an individual can stand out; this is not the case in rowing. As I watch my son compete for Susquehanna University and reminisce about my own days as a coxswain, I can’t help but see the many corollaries between rowing and investing.

“And then I read about this East Asian microcap fund in Forbes,” said Kate, barely taking a breath between sentences. I had asked her to tell me about her investments and she was on her 139th holding! There were still at least twenty more to go. Hoarding comes in many different packages. Some people excessively collect piles of useless household items while others buy and hold a multitude of investments, which was the case with Kate. Diversification is important, but too much of a good thing comes full circle back to bad.

And, of course, Friday was a marvelous time to see this in action. With all the economic drama playing out in the world, there were plenty of opportunities to panic. The Greek Prime Minister has resigned! Sell! China devalued its currency a few days ago by 2%! Head for the hills! Chinese stocks are tanking yet again! Get out of American stocks while you can! The Fed might raise short-term interest rates from zero to very nearly zero! It’s the end of the world!

You’ve probably read that the island territory of Puerto Rico formally defaulted on its municipal debt obligations over the weekend—an unsurprising event that has been expected by insiders for more than three months. What did surprise everybody was the fact that the Puerto Rican Public Finance Corporation (PFC) found a way to make a partial payment on its $58 million in interest obligations—even if the amount was only $628,000.

“It’s a great investment!” replied Ed when I asked him why he had purchased his variable annuity. “I get 5% guaranteed—and if the markets do better I get all the upside too!” The promise sounds too good to be true. And, in this case, it is too good to be true. I’ve seen this annuity many times over the past few years. The sales pitch is very convincing—who wouldn’t want no downside risk and full upside benefits. Has anyone tried to sell you this annuity?

“What do you think of these annuities?” Mel asked. “An insurance guy I know is advising us to transfer all of our remaining IRAs into these two investments, and I’m not confident it’s the right approach for us.” Since these annuities didn’t look appropriate for Mel and Ginny, I figured the annuity salesman’s rationale was the big commissions he would earn on the sales.

Risk is a funny thing. Everyone perceives it differently. For example, I would never go bungee jumping, but I know a bungee jumper who is scared of the stock market and keeps all his money in cash.

As a fee-only financial advisor I know that the perception, understanding, and realization of risk is of the utmost importance when investing, whether for retirement or fun. It is vital to be become aware of the risks that aren’t obvious as well as to not over exaggerate the ones that are.

Why “take the money and run” may be your best strategy at work

I remember the first time the markets slapped me hard like it was yesterday—the sinking feeling in my stomach, the nausea, the disbelief with which I stared at my Bloomberg screen. The employment numbers had just been released and my first interest rate option position was tanking. I had planned to be the new hot shot. I had been so confident. I knew what the markets were going to do. Why couldn’t everyone else see what I saw? It was so obvious. What an idiot I was. The risk was staring me in the face all along, but I never really expected the downside to materialize for me!

Harnessing your deal hunting skills to score investment bargains

Ah, January! The month of sales. The shop windows are all advertising 60 and 70 percent off. I get daily emails filled with deals on everything from apparel to car parts. Who doesn’t love a sale? They can dramatically shift the value equation—getting more stuff for less money. We as Americans have become highly skilled at navigating the retail system to score big bargains. My husband came home from the grocery store the other day on a value high after a particularly successful hunt: he purchased Italian sausage that was not only on special by the manufacturer for 20% off, but the store was offering an additional 30% discount, and, because the sausage was close its expiration date, the manager tagged it with a $2 off at the register coupon. Wow! I felt like the store was going to pay him to take the sausage.