The same thing that keeps us from change keeps many from making money in stocks

By Dian Vujovich

If there’s a four-letter word that loses investors more money than bad advice, it’s f-e-a-r. Yes, that dastardly word has likely done more damage to one’s portfolio than an ugly sustained bear market.

MFS Investment Management recently conducted a study and found that those with at least $100,000 to invest are living in fear of the marketplace with 65 percent of them concerned about another serious market fall.

And what a shame that is. Not only does fear freeze us up but it can also mess with our mind and the invested and investible money we’ve got. Case in point: The DJIA has been heading north for the past two years. Okay, not in a straight line up, but prices never go straight up, they trend upwards. One glance at how the average U.S. diversified stock fund has performed year-to-date through November 4, and for the past one and two years will show you that.

According to Lipper, the average equity fund was up 12.32 percent year-to-date; was up 18.44 percent for the past 52-weeeks; and 18.3 percent over the past 2 years. Very sweet returns.

Play the sector funds game and big bucks were really made in precious metals funds. The average fund in this group of 101 different funds was up over 37 percent year-to-date; 40 percent for the past 52 weeks; and 70 percent over the past two years.

Those who didn’t mess with stock funds in their portfolios, IRAs or 401(k)s have regained about 80 percent of what was lost when the market hit the skids and crashed after the collapse of Lehman in 2008.

Even if you’d gotten on the individual stock bandwagon and bought a few of the large companies in the DJIA that were selling under 20 bucks a share you would have made nice money over the past couple of years or even the last few months. Look at Apple’s performance or those of smaller companies like Raven, Crocs and Zagg and you’ll find double- and triple baggers.

So what’s up with this fear thing? Psychologists will tell you that it has to do with the unknown as in not knowing what’s going to happen to us in the future—like tomorrow or the next day. I’ll tell you nobody has ever known what’s going to happen to them tomorrow or the next day in their personal lives or with their money or the investments they have made.

I’ll also tell you that fear cripples people from thinking logically and thus from making good decisions.

Because no one knows what the future will bring, investing has always been and will always be a gamble. Period. We all take our chances in the markets just as we do in other parts of our lives. The very best we can do is to know/understand that and then enjoy the ride.

Perhaps that’s why, long ago, in another century the conventional investment advice went something like this: “Don’t invest money that you can’t afford to lose”.