We should never invest short-term money in long-term investments. Long-term investments tend to fluctuate in value. Our short-term money should be safe and not fluctuating. The purpose of our short-term money is to be able to access it whenever we need or want without risk of loss.
In order to grow our investments, we will need to have discipline and patience when monitoring our long-term investments on an ongoing basis. Patience is the right word to describe what it takes to be a successful long-term investor. The first half of 2022 is the stock market’s worst start in 50 years. If we are not careful, the headlines blind us to our long-term goals. It is very much human to be distracted by the “bad news.” As many of my older clients and mentors have taught me over the past 36 years, the “bad news” gives us opportunity. Significant down-market opportunities don’t come along very often. Investing long-term money intended for growth is kind of like eating our vegetables. It might not be as appetizing, but it certainly can do us good for the long haul – at least it has throughout history. As you know, history is not always the perfect indicator and is often not indicative of future results, especially in the short-term. A program of regular investing neither ensures a profit nor protects against loss, and investors should consider their willingness to keep investing when share prices are declining. Long-term investing is not for the faint of heart.
“Bad news” is such a common term. All my life I’ve been hearing people say, “It’s different this time.” And they are always right in the sense that times do change. For one thing, we’ve never had this level of technology in the world. The world is constantly changing. I submit that the majority of these changes offer opportunities. Yes, change is emotionally difficult for us as humans. But that doesn’t translate into chaos. Many times, change translates into opportunity. I agree with Peter Diamandis (Google search this guy and find an interesting thought process) that our world is at “the dawning of the age of abundance.” Please take a look back at how the financial markets performed after some of our most grim headlines during the past 80 years. Take, for example, the 10- & 20-year periods after December 7, 1941, when Pearl Harbor was bombed. Another example is the 10- & 20-year periods immediately after The Berlin Wall was erected August 13, 1961. How about the 10 & 20 years after President Kennedy was assassinated November 22, 1963? What about the 10 & 20 years after President Nixon resigned August 9, 1974? The 10 & 20 years after Iraqi troops invaded Kuwait August 2, 1990, which set off the first Gulf War, is another time of really dark headlines. Perhaps one of the worst periods of American history was 9/11/01 when terrorists attacked the World Trade Center in New York City and the Pentagon building in Washington, DC. The next 10 & 20 years were interesting, to say the least. The next 10 years after 9/11/01 also contained the worst recession in modern-era America, second only to the Great Depression. In each of these examples of truly “bad news,” the 10- & 20-year periods of economic activity that followed provided very positive market returns on high-quality long-term investments. As I mentioned earlier, past performance is not necessarily indicative of future returns. We have a brochure that more specifically discusses this topic of bad news, and that there have always been “headline” reasons to not invest. This brochure gives strong evidence as to why we should always look at the long-term picture and not just the short-term headlines. We will be happy to give you a complimentary copy of this brochure. You simply have to stop by our office and ask for it.
Please take heart in that the bad news we see and hear on a daily basis is all around us. If we are not careful, this bad news engages our emotions and we make decisions based on our emotions and not the facts. I urge you not to have short-term money invested in long-term assets like stocks and mutual funds of stocks, which we call owning. But for our long-term growth-oriented money, we should focus on our long-term objectives (goals) and invest accordingly with a long-term view. I urge you to seek the counsel of a financial advisor/financial planner that will help you assess your goals and objectives, and also your risk tolerance. Everyone’s situation is unique and should be addressed as such. If we can be of help, we welcome your call. If we aren’t the right fit, we will be happy to refer you to someone else.
-by Ben Smith
Registered Principal, RJFS
313 East 10th Ave. • Bowling Green, KY 42101 • Phone: 270-846-2656
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of the author, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision.
Ben Smith Life Compass Financial is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc.
