A Reminder During Tough Times
Another week has passed and markets are still very choppy. Market sentiment is low, and we’ve all seen our accounts take a hit this year. I’d say our clients fall into three categories during times like these.
Category A: Those that don’t worry about it and know these things will pass. These individuals don’t worry about market movements and thus go on with their normal lives.
Category B: Those that take a very opportunistic approach and see market dips as a great buying opportunity. These individuals make changes for the offensive and even “buy the dip” during tumultuous times.
Category C: Those individuals that are getting really nervous. They see accounts drop and sometimes even let fears deter them from making sound long-term financial decisions. These are the people for whom we must aid the most during difficult times. In addition, these more nervous types are ones that I have some keen words of wisdom for, as you’ll see below.
Words of Wisdom
I like sayings and one-liners in general. I think they go a long way in summarizing complex situations into bite-size pieces. During market turbulence, I often go back to some sage words I once heard a 60-year industry guru say. He’s someone I’ve followed and respected for a long time and I want to share his nugget of wisdom with you here today.
The anecdote goes like this. ”All successful lifetime investing is goal-focused and planning driven. All failed lifetime investing is market-focused and current events-driven. I infer from that 2 experiences. Every really successful investor was acting continuously on a plan. Every failed investor was reacting continually to events.”
Powerful words, right? Let’s take a moment and analyze these critical words of advice.
All Successful lifetime investing is goal-focused and planning-driven. I could not agree more. The most successful lifetime investors I have ever come across don’t ever let emotions get in the way. They create a great financial foundation and plan. They then spend their entire lives working on that plan and adjusting it along the way. To do anything otherwise becomes a guessing game and one that is extremely difficult to create a predictable outcome for. Thus, every truly successful investor was and is continually acting on a well-crafted plan. Shameless plug, that is EXACTLY what we seek to do here at Diversified, LLC.
All failed lifetime investing is market-focused and current events-driven. I know this sounds somewhat counterintuitive, right? Isn’t that exactly what investors do? Take current info and events to make sound investment choices? Well, yes and no. The yes part is of course our investment team and managers use these market fluctuations to adjust in the hopes of being opportunistic. The no part is the more nuanced component here. You see when we start letting market and media noise influence our direction we are doomed. Studies show this is when we make unimaginable errors.
For instance, did you think in March 2020 when a global pandemic literally shut down the world that one month later, and after the quickest bear market in history, we would have rebounded? Or that we’d go on an almost two-year tear hitting new market highs left, and right? Well, if you did good for you, as I certainly didn’t see that coming. The people who came out most unscathed here were the ones that didn’t let news and fear drive their decisions. The ones who made major shifts away from their plan, well they are still licking their wounds. In other words, every failed investor was reacting continually to events.
What works, and What doesn’t?
There is an old saying investments work, investors don’t. I’ve been around this business for a long time (oy can’t believe I can now say that). I’ve coached thousands of individuals during my career representing billions of dollars. I believe that I have a perspective that you can only have if you live, breathe, and bleed this business. That said, I can tell you that these words of wisdom ring as true now, as they did years ago when I first heard them.
Do you want to succeed at this lifetime investing game? Get a partner or team you respect and trust. Let them guide you and earn their keep, especially during these trying times. As my CEO Mike Fisher always says, period end of story.
Hope you enjoyed this nugget and as always stay wealthy, healthy, and happy.
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