I woke up and looked at the clock, and it was just after 3 a.m.I was coughing, my nose hurt from the tissue I had reached for so many times in the past two days, and I couldnt seem to get more than two hours sleep at a time since I had arrived.

I was in Santa Fe for a conference of the Investment Management Consultants Association and a meeting of Certified Investment Management Analysts. I love the West and I love Santa Fe.I had been there twice before and was excited to get back.However, my body felt as out of place as a bagel in a pot of grits. I had come from the hills of Mississippi where a dry day is when the humidity drops to only 60 percent and the highest point is just more than 600 feet above sea level.

Santa Fe, on the other hand, is high desert where the air is dry and much less pronounced. It played havoc with my respiratory system. I was only slightly comforted by the fact that on my second trip to the hotel gift shop they had sold out of every product that could help me.I was obviously not alone. I walked up the street to a local drug store and saw a number of familiar faces in the section I would get to know by heart over the next few days.

Comfort zones. We each have different comfort zones. I didnt notice any of the locals with red noses and watery eyes and I bet that if they came to Tupelo in August, they would have a hard time getting through a day of 98 degree heat coupled with 80 percent humidity.

Financial Advisors who use modern portfolio theory will talk about comfort zones quite a bit. It is important that investors find their comfort zone and stay within it when they invest. Comfort zones, in our business, usually refer to risk levels and how much risk our clients are comfortable taking in their investment portfolio.

I have found over the years that when clients get very far away from their comfort zones, they start making bad decisions.Situations that may be very normal for people in a certain comfort zone may make someone from another zone very uncomfortable and making the best decision can become problematic.

Its not easy to make a good decision when your nose is running, your head feels like it is about to explode, your ears are stopped up and your throat is scratchy.The same is true for investors who step outside of their comfort zone.They just dont make the best decisions.

Reasons for drifting

Investors tend to drift from their comfort zones for one of two reasons; greed or fear.If they get too scared of the markets, they tend to buy investments that are safe but provide little return in the long run making it hard to reach their goals.On the other hand, if they see the market as easy prey, they tend to put too much money at risk in an attempt to bring in the big fish.

Its easy to see how this happens so often.Most investors these days are pretty savvy when it comes to risk versus return.They know that ours is a risk/reward business and the more risk you take, the more reward you reap in the long run. Intellectually, it is an easy concept to understand. It is much harder, however, to put the concept into practice because the long run is always far away and somewhat uncertain, but the present is always here and the reality of what happened to you today or this week or this quarter is very hard to ignore.

Its easy to see how this happens so often.Most investors these days are pretty savvy when it comes to risk versus return.They know that ours is a risk/reward business and the more risk you take, the more reward you reap in the long run. Intellectually, it is an easy concept to understand. It is much harder, however, to put the concept into practice because the long run is always far away and somewhat uncertain, but the present is always here and the reality of what happened to you today or this week or this quarter is very hard to ignore.

Often the effect of what is happening to you now forces you to make a bad decision going forward if you are not comfortable. For instance, you may have decided that you are comfortable with an investment that could fluctuate anywhere from a minus-5 percent return to a positive 10 percent return in any one year, but you know that if you buy an investment that can fluctuate as much as minus-10 percent and positive 15 percent you will have higher returns in the long run, so you buy the more aggressive investment.

If that investment goes down 3 percent in the first year, you are in your real comfort zone and your head is clear about what to do.If, on the other hand, your investment goes down 9 percent in the first year, your eyes start itching, your nose starts to run and you cant hear yourself think because your cough is so loud.Thats when you start making bad decisions and getting those better results in the long run become much harder to achieve.

Making good decisions requires not only knowledge, but a clear head as well.The best way to do that when you are investing is to find your comfort zone and stay there.

Scott Reed, CIMA, CWA, AIF, is first vice president of Hilliard Lyons, member NYSE and SIPC, in Tupelo.