Good morning & happy Monday!
“Life can still be beautiful, meaningful, fun, and fulfilling even if things don’t turn out the way you planned.”
– Lori Deschene
A few weeks ago, I told you about one of my adventures on my recent Alaska trip, a day long cruise where we had very rough seas but saw a pod of orca whales. The orca whales encounter was amazing, but the rough seas were not part of my plan.
Needless to say, there were plenty of things that did not go as planned on that trip.
I did not plan on it raining virtually every day we were there. I did not expect to spend hours on a fishing charter before we caught our first salmon. I did not plan on our cruise ship being forced to skip 2 out of the 6 destinations on the itinerary because of weather & winds.
These were disappointing developments, but all of them came with some unexpected blessings too.
The rain made the waterfalls abundantly full and even spotted us a couple of rainbows. The fishing charter made the first fish we brought in even more exciting. And the missed cruise itinerary stops allowed us extra time in other places that we greatly enjoyed.
As someone who thoroughly enjoys traveling, it is important to realize that things oftentimes do not go as planned. It’s just part of traveling. It’s just part of life.
The rain falls down, the fish don’t bite, the schedule gets diverted. Rather than reveling in the disappointment of these developments and allowing them to ruin our time, we’ve learned to take them in stride and enjoy the journey.
How do we respond when life does not go as planned?
What about our response when our investments don’t do what we want all the time?
As your financial advisor I would love to tell you that your investment portfolio will steadily increase day after day, month after month, year after year … but that’s just not how it works.
Setting expectations is an important part of being an investor, heck, it’s an important part of being a human being. 😊
Let’s play a silly, hypothetical game.
If you had your choice between these 2 investments, which one would you choose?
Investment #1 returns a steady, consistent return of 5% every year for the next 5 years.
Investment #2 has the following returns for the next 5 years: +15%, +20%, 0%, -15%, and +20%.
I’ll save you the calculations and tell you that if you had $100,000 in investment # 1 after 5 years you would have $127,628 and in investment #2 you would have $140,760.
Investment #2 averaged an 8% rate of return during those 5 years, but 2 out of the 5 years did not go as planned.
In year #3 you see the return was 0% and in year #4 the return was a negative 15%. If you took a snapshot during those 24 months you would have been better off in investment #1 or even better off with the money under the pillow.
It’s how we behave as investors during those years that will determine if we will be successful in this investing endeavor.
Not everyone can do it. There are those who can’t stomach periods of time with negative or 0% returns. I won’t sugar coat it … those people quite simply cannot be successful investors.
We as investors understand that rain is part of the investing forecast. But as opposed to meteorologists, we just don’t know when it’s going to come or how much rain there will be. However, that will not deter us from the journey of investing. We will take the rain because it’s part of the journey towards the destination we want to go.
As a frequent traveler I could say, “It might rain, so I’ll just stay at home as opposed to going on a grand adventure.” But then I would miss some amazing life experiences. I would rather take the rain and the adventure rather than sit on my couch watching a TV show about the adventures of others.
I want to be in the game! But, if we enter the game, we just must set realistic expectations, and realizing returns are quite variable is as critical to success as any other investing skill one can develop.
I am so grateful that you are on team Intentional Wealth! No matter what the future holds, no matter how variable the weather is, we are thrilled to be your tour guides.
Thank you for trusting us with your cherished financial future. Please reach out with any ways we can support you along the way.
Make it a great week ahead.