It’s All About Perspective
As a financial advisor, I constantly am hearing from prospective clients reasons why they do not want to begin to take control of their financial future. These objections take on various identities: The market has risen too high, the President and/or the Congress is clueless, corporations cannot be trusted, or the market is rigged against the little guy. While I do not deny problems exist, I do believe there have always been problems in the world and there will continue to be problems in the world that will remain to be solved. One problem that we all hope to face is that with longer life expectancies, funding an active retirement takes a lot of planning and a lot of money. I think it is a mistake to allow events out of our control to stop us from taking the necessary steps to secure our future personal well-being. After all, this President and Congress will be a footnote to history when you’re enjoying your twentieth year of retirement.
If we step away from today’s headlines and take a look what has really happened to the quality of life over the past 150 years, the story is remarkable. As measured by GDP per capita adjusted for inflation, the average American’s standard of living has increased twenty times*! During this period, there certainly have been news events that would make you believe progress would falter, but the fact is, it has not. My own great-grandmother was born in the late 1800s and lived well into her 90s. Imagine the progress she witnessed from horse and buggy, to cars, to planes, to a man walking on the moon! How many things do we enjoy and prosper from today that did not exist even ten years ago? Do you believe humanity has stopped searching for answers and solutions to our problems? If not, why would you not want to be a participant by owning a share of the companies making these advances?
The real question, in my opinion, is how can we participate in the march of human progress, while insuring that market events do not threaten our financial security. My answer to that is diversification and aligning your assets up with the goals and needs that you have. As an example, if you know you need to pay for your daughter’s wedding in 18 months, you should not invest those funds in the stock market. Conversely, if you are saving for retirement that may last twenty years, you should not put it all in CDs where it is likely to grow slower than inflation. Every investment has a positive and a negative attribute and by blending them together in alignment with your personal goal, you are much more likely to obtain the financial security you seek. The market may be up or down next month or year, but it should not matter if you are diversified in alignment with your goals and you keep the long term perspective of human progress.
*Louis Johnston and Samuel H. Williamson, “What Was the U.S. GDP Then?” MeasuringWorth, 2013.
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