Long Term Investing

It’s my belief that the longer your time horizon, the more it starts to be your friend.

What do I mean by that? Investments of all nature tend to be cyclical, meaning as a normal course of business they go up and down. The longer you’re invested, the more of these intermediary “cycles” you’ll experience, with the end goal eventually being up. If you don’t believe that long term the value will be greater, then why are you investing?

Anyway, many times people say “but I just retired and I’m no longer a long term investor”. My answer is that I hope you’re still a long term investor, as I hope you live a long life.

For a full discussion of this, I highly recommend you watch my video. Good stuff (if I do say so myself).

 

Good morning, Mike Brady here with Generosity Wealth Management, a comprehensive full-service wealth management firm headquartered right here in Boulder, Colorado and today I want to talk about how long-term investing is probably going to be better on your stomach and being able to sleep well at night. I want to really talk about that.

You might say to yourself, “Mike, I’ve heard that before but I’m not a long-term investor because I’m retiring next year or I just retired.” All I would respond is, “I sure hope that you’re long-term because hopefully you’re going to live a very long and fruitful life all through retirement and you don’t want to outlive your money so even though you might think that you can’t be a long-term investor, you probably are.”

I’m going to put two or three different charts up on the screen so pay attention.

The first one is the 100% unmanaged stockmarket index over the last 15 years. You’re going to see it up, down, up, down, all over the place and by looking at this chart you’re probably saying to yourself, oh the market’s gotta go down. Well, I’m just saying that’s not necessarily the case.

I’m going to put the second chart up if you could pay attention to it and this is the 100% stockmarket index over a 113-year timeframe and what you’ll see, there are some times where it plateaus, sometimes where the trend is down, and times when it’s a generally up-trending market.

The third chart that I’m going to put up on the video is the range of returns over a one, a five, a 10, and a 20 year time horizon. What you’ll see, is as the time horizon is shorter, whether it’s unmanaged stockmarket index, unmanaged bond index, or a 50/50 between the two, the shorter you go the more volatile the standard deviation as we call it, it gets greater and the range of return is very high or very low. As we go out from left to right on that chart, what you’ll see is the band starts to get narrow and narrower. I bring this up because many times we have a tendency to look at things on an hourly or a daily, particularly with the 24-hour news channels and cycle anymore, weekly, monthly, even quarterly or annually, when really we need to keep our eye on our plan and start to look at things from a long-term vision.

Of course you should work with your financial advisor, hopefully I’m that guy, in order to find a plan that works for you that you feel works with your particular goals and your risk tolerance, etcetera. We do have to keep a long-term vision and of course review it, how it’s fitting with our plan, but let’s start thinking long-term.

Mike Brady, Generosity Wealth Management, 303-747-6455. If you’re not my client, give me a call and we’ll talk about it. If you’re my client, I love you and I think that’s it for today. You have a wonderful week, wonderful day, wonderful week, wonderful quarter, and of course wonderful long-term horizon as well. Bye-bye now.

 



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The Dow Jones Industrial Average is an unmanaged, price-weighted index of 30 large capitalization stocks with dividends reinvested.

The Standard & Poor’s 500 Index (“S&P 500”) is an unmanaged, market capitalization weighted index of 500 widely held stocks, with dividends reinvested, and is often used as a proxy for the stock market.

The Nasdaq Composite is an unmanaged, market capitalization weighted index of stocks listed on the Nasdaq Stock Exchange, and are reported as price return without reinvestment of dividends.

Indexes are often used as a proxy for the stock market and cannot be invested in directly.