Timeless Principals of Investing

FOCUS ON WHAT YOU CAN CONTROL

Market movements, business decisions, economic events, politics, interest rates—many factors can influence the performance of your investments. Instead of worrying about events that are out of your hands, focus on optimizing what’s in your control.

PUT TIME ON YOUR SIDE

The financial markets have rewarded long-term investors. People expect a positive return on the capital they supply, and, historically over time, the equity and bond markets have provided growth of wealth that has more than offset inflation.

TUNE OUT THE NOISE

News cycles driven by fear, uncertainty, and doubt can challenge even the most disciplined investor. Some headlines spark anxiety, while others try to goad you into chasing the hottest fads and trends. Although we live in an era of seemingly infinite data, information overload can cause you to make faulty investment decisions. When in doubt, tune out the noise and focus on a long term perspective.

DON’T TRY TO TIME MARKETS

Will Rodgers famously said "Buy some good stock, hold it until it goes up, and then sell it. If it doesn't go up, don't buy it." The problem is that you never know how the market will perform from year to year or which segment will outperform. Yesterday’s winner may be tomorrow’s loser, and chasing performance is rarely a successful strategy. Instead of trying to time markets, develop a prudent investment strategy that seeks to protect and grow your investments in all market environments.

UNDERSTAND ALL FORMS OF RISK

Market risk—or the risk of your portfolio losing value—isn’t the only one you should be thinking about. Long lifespans, inflation, and rising healthcare costs mean that many Americans face the very real danger of running out of money during retirement. While you shouldn’t be reckless about risk, make sure that fear of investment loss isn’t leaving you open to other forms of risk.

AVOID THE EMOTIONAL ROLLER COASTER

Emotional decision-making can wreak havoc on your long-term portfolio returns. A recent Dalbar study found that while the S&P 500 returned 9.9% between 1995 and 2014, the average investor fared much worse, seeing only a 2.5% return during the same period. Why? Research suggests that investors make poor investment decisions about buying and selling, frequently driven by the opposing psychological forces of fear and greed.

KICK UP THE SAVINGS

Spending less and saving more is one of the best things you can do to boost your long-term financial picture. Consider a simple example: if you had $250,000 in savings, earned an annual salary of $100,000, and invested 10% of your salary each year at a 6% nominal annual return (with 3% annual inflation), you would have $812,750 in 20 years. However, if you increased your savings rate by just 1% each year to a maximum of 15%, you’d end up with $966,269.

DELEGATE THE DETAILS

Financial professionals can help you create a customized portfolio strategy that's built around your unique goals. Though we can't control markets, we can help you use them to pursue your long-term financial goals.