My day job has me sitting across the table from some really great people.
Individuals and couples alike are striving to maximize their retirement savings over the next decade or so, aiming to enjoy a life of financial freedom, dignity, and purpose—supported by the investment portfolio they’ve carefully built and nested away during their careers, all with the hope of not outliving it.
Just when I’m expecting the conversation to be about stewarding the nest they’ve worked hard to save, it takes a frightful turn. Suddenly, and without warning, the gentleman is inquiring if they should invest now our wait for the looming correction. The lady is wondering if they can even retire at all until they see how the current political, economic, fiscal, monetary, bird flu, war, embargo, bail out, Fed meeting, or ‘crisis’ gets resolved.
I inhale deeply…I’ve seen this movie before.
They’re normal, red-blooded, hardworking Americans who’ve succumbed to the 24-hour news cycle. This equates to the dangerous concoction of fear and the reality that they have no long-term perspective at all. And, in a convergence of desire and fate, they come to me trying to make sense of a forty-year retirement plan driven by the last hour’s breaking news.
It’s all very…human…I suppose. All quite logical really. I mean, there is a lot to worry about isn’t there? I’ve listed quite a few of those worries already, but there’s myriad more. We humans thrive on being in the ‘know’ and reacting to it. Yet, in the end, we suffer more from imagination than reality. Which, gentle reader, is why I was created…and, in general, why Financial Advisors were created. It’s to separate the headlines from history. It’s to save the client from their worst enemy…themselves. It’s to offer them a long-term historical perspective. It’s to help them understand truth, not react on news. It’s to let them know that, this too, shall pass.
In my 25+ years of experience, I’ve come to a final conclusion: Long-term optimism is the antidote to the crisis of the day. Succinctly: The Best Is Ahead…Always. This is true in life, and in investing.
The S&P 500 tracks the value of the 500 largest corporations in the US that are publicly traded. While I haven’t always been great at this, one of my favorite tools in my toolbox is to check the value of the S&P 500 on the day that my clients’ were born. When I contrast that value with the market’s closing value on the date of my conversation across the conference room table, it always proves to be the single most striking long-term perspective setting statistic in my entire arsenal.
To wit, the S&P 500 closed at 98 on the delightful day I was born. At the time of this writing, it closed at 5,332. That represents a 54x growth rate on America’s best run companies. Wars, pandemics, financial crisis’, political parties, all have come and gone. Yet, the gasoline of wealth creation…a long-term perspective…has continued to power the markets forward and compounded wealth for those who’ve placed their trust in them.
Stay calm, stay invested. Embrace a long term perspective. The Best Is Ahead!
