Investing for the Long Term Requires More than InvestingJul 08, 2022
We're often told that "investing for the long term" is the secret to financial success. But, as they say, if all you have is a hammer, everything looks like a nail...
People trying to talk about market performance -- just the logic of it -- makes little sense to me.
On one hand, you have the experts showing us all kinds of historical stats in an attempt to prove what they are saying is true. (Even though all their documentation must state, in big, bold letters, a warning that says, “past performance is not indicative of future results.")
Then, on the other hand, any time we see a total market correction, these same experts will be the first to say “the world has never seen anything like this before…”
Investment advisors are starting to look a little desperate to convince us the hammer they sell can do more than hammer nails. There are a lot of posts out there right now telling us not to worry. Just look at these historical stats about the big market returns that we can expect for the 3-5 years following a big market loss (…that, don’t forget, they didn’t see coming).
The numbers aren’t wrong, per se, but the problem is that it completely matters *when* these events occur. "Investing for the long term" eventually always becomes "investing for the short term."
Imagine retiring at the end of 2021 and seeing your retirement account get slashed by 20, 30, 40% right off the bat…
Really imagine it. You retire with, say $5M. 6 months into your retirement, you have already lost $1,000,000 (!). This is all the money you have in the world; it needs to last for the rest of your life, and big market corrections have certainly continued beyond 6 months.
Are you really going to tell me that you’ll be able to sit tight for 3-5 years in the hopes you get it back? How can it possibly recover if you’re also pulling money out to live on?
How much further would it have to go down before you were forced to make some changes, breaking from the “invest for the long term” philosophy and taking a loss
Unfortunately, the only tool we are taught to have in our financial toolbox is investments.
But if you want to build a spaceship, you’re going to need more than a hammer.
If you’re in your 40’s, 50’s, or 60’s and want to learn how to bulletproof your existing investments, get more income from them, and pay less tax – get in touch!