Broker Check

Ahhh, Cliches, don't you just love them?!

| September 04, 2018
Share |

Here are ones that you hear frequently:

“A stitch in time saves nine”

“A rolling stone gathers no moss”

“A bird in the hand is worth two in the bush”

“Actions speak louder than words”

“The grass is always greener on the other side”

“The apple does not fall far from the tree”

There is a good message in all of these, and if we heeded those messages life would be more enjoyable and less stressful. Those messages include timing, action, opportunity, living by example, reality, challenges, and blessings. I assume that most, including me, treat them as just cliché’s without adopting the messages they convey on a regular basis.

And here is one you likely do not hear often: “Plan for the best and prepare for the worst”

Applying that cliché to wealth management is what I call “common sense but not common practice”. It is a proven fact that many do-it-yourselfers make financial decisions driven by fear, emotions, and the occasional financial tip from a friend or family member. It is human nature to believe we should do something when we experience fear or emotions, and yet is has been proven time and time again in the financial environment, that that is often the worst time to do anything. Here are some facts that you may find interesting:

  1. The stock market has trended up for almost 100 years, and a conservative 50/50 allocation (equities/bonds) has averaged over 8% over that time period.
  2. Active money management has rarely allowed investors to achieve market benchmarks of performance.
  3. Passive and enhanced indexing methods have been outperforming the benchmarks, aided by technology that now allows the sifting of millions of bits of data very quickly.
  4. Value has been proven to be created with the principles of Faith, Patience, and Discipline: (a) Faith that the market will perform as it has historically, (b) Patience to allow the market to experience cycles, (c) Discipline to stick with your plan
  5. The market (S&P 500) is up over 400% since March, 2009.

Do you know of anyone who made the perfect decision on exiting the market at it’s height (October, 2007), or perhaps got back in at the perfect time (March, 2009). I doubt not, and those that let fear and emotions drive their decisions, likely got out at the wrong time (made their losses permanent), or did not get back in at the right time (missed the upside). So back to my initial cliché: Plan for the best (which means be invested), and prepare for the worst (which means be appropriately diversified).

Faith, Patience and Discipline works, and it may also lower your anxiety.

Share |