Good morning & happy Monday!
“You have enemies? Good. That means you’ve stood up for something, sometime in your life.”
Winston Churchill
As investors we all have enemies. Some are easy to identify, some are not.
A few easy enemies to identify are market drops, taxes, and inflation.
But what is an investors’ #1 enemy? It’s actually not a what but a who. The answer: the investor himself / herself.
We as investors can be our biggest enemy. This is only natural as our innate desire to protect and preserve. If I was a caveman I would want to protect and preserve the food I grew / hunted. In medicine the idea of preserving and protecting our life / health is of the highest priority. Yet, with investing we are sacrificing a sense safety and security in order to grow our assets more over time, in can just feel wrong at times.
Investing by its very nature is counter intuitive.
Thus, we can be our own worst enemies. Anyone of us is very capable of sabotaging our own investing success by making emotionally based decisions.
And this does not have to happen frequently to be very problematic.
Let’s say I have $1,000,000 invested and the market goes down 30% and I sell my investments “until things settle down” (something I hear every single time there is a market correction). Let’s say the market recovers and is up from the correction and is positive 5% at the point I want to get back in. If I stayed the course, I would have $1,050,000 … instead I have $700,000 because I sold when the market was down.
Let’s say that’s the only time I make a mistake like that in my entire investing career. 30 years later with an average rate of return of 7% I would have $5,681,548. If I didn’t make that one mistake 30 years ago, I would have $8,522,322. So that one mistake in this example cost me almost $3 million over 30 years. And that’s just one mistake in 30 years. As you can imagine, a few mistakes at critical times in one’s investing lifetime can be paramount to financial suicide.
That is where a plan and a planner comes in … that is why were are here … and that is one of the most important roles we serve in our client’s lives … saving investors from themselves. We are here to provide insight and guidance to avoid the big mistakes we are all so prone to making.
Thank you for allowing us to serve you in this capacity … it is an incredible honor.