“How we deal with the downside makes all the difference in the world.” – Jeremy Finger
If we successfully eliminate what not to do, we should be left with only the things we should do.
Today’s lessons in FFF are what other investors need to know, but not you. You are already doing these time-tested principles. You may want to read them anyway, so you can pass them on to others to teach them what you already know. Right???
Of course, you know the market goes up and down daily. When we span out over a year, we can see calendar year returns are mostly positive AND, almost without exception, there is a point in time during that year when the market was down. You were smart. You either stuck to the plan and continued to save, ignoring the others who were saying the world is coming to an end, or you did not sell and went about your business and enjoyed your lovely retirement.
You know that eating a balanced meal is healthy. You can’t survive very long eating only mint chocolate chip ice cream, although I have tried. Your investments are balanced. You know that each year some areas do better than others and you can’t predict which will do better next year. Instead, you have invested properly according to your goals and your risk tolerance. Instead of stressing daily on what the markets are doing, you are out in the world enjoying your life. You let others try to gamble on which areas will outperform next year.
My dad was a General Practice MD. My friends would often ask him medical questions. One friend asked him: “Hey Dr. Finger, when I raise my arm like this, it hurts right here.” My dad said, “Well don’t do that.” So funny and so true. His point was it will get better with time and there is no substitute for time. You know the longer you stay invested, the better your chances of success.
You marvel at the emotional decisions people make when it comes to investing. They change tactics due to markets are new highs. They sell when their political party doesn’t win. They buy the hottest recent performing sectors. They sell the worst performing investment because they are “tired of seeing it in their account”. They sell their winners and hold on to their losers. They buy only their winners and are not balanced at all. They wait “until the market calms down” before they invest. They keep bad investments until they “break even”. They make these mistakes, but not you. You know these mistakes lead to awful returns over time. You also know that if you miss just a few of the best days in the market, it can be very costly. Instead of stressing about the market each day, you are enjoying time with your kids, grandkids, tending to your garden, caring for a loved one, enjoying your work, and volunteering for your favorite charity. You know that is where your time is best spent.
You know cash as an investment is a loser to inflation — even though your bank statements say the same dollar amount each month, what that money can buy is less and less. You also know that cash has its place. It is there for emergencies like job loss, unforeseen medical expenses, as a buffer from selling investments, and for operating expenses. If working you have at least 6 months of cash, and if retired you have a year or more.
Feel free to email me at Jeremy@Riverbendwm.com or click here to setup a phone appointment.
On the lighter side, when I hired my triathlon coach, I felt a relief immediately; knowing that I had a trusted guide to get me where I want to go. I am doing the training, but I have not been eating as I should. My eating is the financial equivalent of spending too much money and it is taking a toll on my back. This is the downside. Pain+ self-reflection=progress. It is times like this, that having a trusted coach makes all the difference in the world. The downside exposes my weaknesses. He can help get me through my physical “bear market.” We can plan through or around them.
I can hear my coach say the same thing I say to clients. Focus on the big picture. Goals. Trust the process. Manage the downside. I feel the struggle against old bad habits. I say to myself, Jeremy, just put the blinders on and take the next step. Just for today.
Hope all is well with you and your family,
Jeremy Finger, CFP®, CIMA®, CRPC®, CPFA
Founder & CEO
Wealth Management Advisor
Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information. My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.
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Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.
This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.