Don't let it get the best of you
As your financial advisor, there are things we subject ourselves to that we prefer most don't. Thinks like keeping track of the market each and every trading day, hour, and minute. There are tons of things going on that can impact your portfolio and account at any given moment. Information travels at such a fast pace these days that by the time you learn about them, the bots and other algorithmic traders have taken action. Don't be fooled by that rhetoric though. Money isn't made with one or two timely trades. If you hit a couple of big scores here and there, that's great. The reality is most wealth is created over time with discipline. Sure you'll hear it from your neighbor or buddy that brags at a coffee shop about how they bought XYZ stock when it was trading for pennies and how they're worth millions. Most of the big scores we've witnessed over the years have been a bit of luck and tend to be with small dollars. The big bucks are reserved for your "real" investment which is meant to be massaged over the years as you work towards your goals. For many it's retirement!
Having a blueprint and staying focused on long-term goals sounds easy enough, but that can and will be tested over time. There is never a time like we're facing right now. I'm sure many of our seasoned clients have said that over the past twenty to thirty years of their investing life. We know it and hear it in our discussions with clients. As advisors, we wear a ton of hats, but probably one of the most important is as a counselor in a sense. Nobody would possibly deviate from a plan or would they? The market can pull on your emotional strings that can feel like an aggressive tug at times. When the markets are up clients can feel euphoric, proud, and almost invisible. Meetings tend to happen less and less because so what; I'm making money. What are we going to meet for? These can be great times to revisit risk tolerance, time horizon, or goals. It's also a great time to take inventory of what you own, what the tax implications might be, and overall positioning. The most common question we get in bull markets is, can I make more? Yes, believe it or not, some clients have experienced ten to fifteen percent annualized returns and asked if there was a way to take even more risk to eke out an additional one or two percent!
If meeting in up markets is important, should people turn a blind eye to down markets and ignore meetings, statements, and insight for fear of temptation. For some, it could be their only remedy or course of action to prevent them from succumbing to their fear. Many clients have said they don't want to look at statements when they know the economy and stock market are not fairing well. This is where your advisor should truly be earning their worth. These are difficult discussions. There's no hiding from losses. It's real and can be a pretty scary thing to experience. It's also a time when we see the most mistakes happen. We've seen a number of errors happen when the market has performed quite well, but nothing, and I repeat, nothing compares to the irrational decisions we've guided clients away from making.
All too often we meet with prospects who come to us seeking guidance and they'll share some of the mistakes they've made over the years. The majority have been made in down markets when they've lost money and feared the market would never return. Think about that for a minute. What does that mean? Essentially, it's a bet against the entire economy. The stock market is made up of real companies. They make real products, offer valuable services, and actually make money. The whole sky is falling mentality has never held its ground. If it did, would having money in a bank or lying around the house matter? Let's say all of the companies in the S&P 500 are bankrupt. Most or all businesses around you are closed. No banks, no grocery stores, no Walmart, Amazon, etc. All the money in the world couldn't fix that. Guns, land, gold, and some good ole fashioned resources might do you some good, but life in that world would be pretty glim despite having large sums of worthless cash. Alright, enough of the exaggerated doomsday scenario talk.
So what really matters when it comes to your portfolio? You might think political party affiliation has an impact, right? It does to some extent, but there have been several examples in history where the political parties had no bearing on returns. We talk about this in my latest PennyWise Financial Podcast episode. It turns out you can make money investing regardless of who's in office. Now when it comes to the perception of how the economy is going, that's a completely different story. Perception is a funny thing. Making money by owning the right investments and following a disciplined plan goes much further than speculation.
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