• Privacy Policy
  • Terms and Conditions
  • DMCA
  • Contact Us
  • Whitelist
Tuesday, May 17, 2022
  • Home
  • Wealth Management
  • Markets
  • Budgeting
  • Banking
Impulse Wealth
  • Home
  • Wealth Management
  • Markets
  • Budgeting
  • Banking
No Result
View All Result
Impulse Wealth
No Result
View All Result

The two most important things affluent investors can do for success

August 4, 2021
in Wealth Management
0
The two most important things affluent investors can do for success

There’s always a reason to be concerned.

Markets could be lower in two years; they could be higher.

The question, then, becomes: what is your tolerance for discomfort?

What are you going to do if the market goes down 10%?

Or 20%?

There’s a great story on Wall Street involving Joseph Kennedy Sr. and a shoeshine boy.

The father of the 35th U.S. President began building his family fortune in the stock market and through commodities trading.

He also did well to secure the distribution rights for Scotch whisky ahead of prohibition — Kennedy Sr., a man of foresight.

As the legend goes, one day in 1929, Joe Kennedy is getting his shoes shined.

The shoeshine boy began to give stock tips as he polished Kennedy’s oxfords.

At that moment, it struck Joe that he needed to leave the market.

He reasoned, famously, if shoeshine boys have an opinion on stocks, the market is clearly, dangerously popular.

Supposedly, he pulled out not long before the stock market crash, which led to what we know today as the Great Depression.

Some might argue he made the right decision.

But what if he remained invested?

What would his fortune have looked like today?

Financial siren songs come in many differing forms.

Sometimes shoe-shiners.

Sometimes a taxi driver’s stock tip.

Sometimes global events and the media.

Almost daily, high-net-worth investors are reaching out for guidance.

“Should I be worried about the latest market bubble?”

“Is now a good time to buy gold as an inflation hedge?”

No one likes doubt and uncertainty.

These emotions incite us to take action.

To do something.

To change something.

To control something.

But the thing about investing is, it’s almost certainly about uncertainty.

And this is where investors genuinely prove their mettle.

market lows and highs carl richards

We don’t know what will happen in the markets an hour, day, month or year from now.

I’ve read quite a few life-changing investment books.

One of them is Rescue Your Money by Ric Edelman.

It’s a great read for anyone wanting to know how to invest in uncertain times.

In it, he mentions how a long-term focus is vital to achieving your investment goals.

“You must maintain a long-term focus for one simple reason: It’s the only way you can be certain you’ll capture the profits that investments offer – and avoid taking the full brunt of occasional downturns.”

When there’s market volatility, do you continue to invest systematically and consistently?

Or are you prone to reacting?

Fidelity did a study in 2020.

It focussed on investors who stayed with the same investment from 2008 through 2017.

Over this time, their investments grew by a 147%.

That’s twice the average 74% return for those who fled their investments during the fourth quarter of 2008.

While others were selling in panic in 2008 and 2009, these investors were buying.

They inevitably bought more shares with each dollar.

When those shares rose, so did their investments.

Another reason to stay patient and disciplined is that the stock market’s gain only occurs over very short periods.

During years of market crashes, the market will often recover all or most of its losses during a brief period.

So, if you react to the market’s volatility by constantly buying and selling, you could lose out on the year’s gains or sustain bigger losses.

To illustrate this, let’s look at the S&P 500.

In 2007, the year’s entire gains occurred in just 1 week.

In 2014, 93% of gains occurred within 11 weeks.

In 2011, 8% of the year’s loss was recovered in only 24 days.

Between 2011 and 2020, there were 2,517 trading days.

In the past decade alone, the S&P 500 had a total return of 225%.

Now imagine if you stayed invested during this period. 

Volatility and index prices for the S&P 500

It’s common for the stock market to jump in short bursts and long periods of stagnation to follow.

Can you predict when these short bursts will happen?

No.

Neither can I.

Neither can your financial planner.

The two most important things a high-net-worth investor can do to build on their wealth is:

  • Build a globally diversified portfolio
  • Do nothing

In 2007, the behaviour of elite goal-keepers was examined.

286 penalty kicks were analysed.

It was discovered that although goalies almost always jump left or right, the optimal strategy to achieve better results is actually to stay in the goal’s centre.

In other words, do nothing at all.

Something that applies to investors too.

Do you understand the benefits of staying disciplined and patient?

There’ll always be uncertainty.

Markets, economies and politics are always changing.

There’s nothing you can do about it.

But one thing is undeniable and that’s the evidence proving a long-term, disciplined and patient investment approach is key to achieving your financial goals.

When the market’s volatility and the media’s headlines encourage you to sell, remember the only way to make those losses concrete is to cash out.

Staying invested and riding out the storm is not only the rational thing to do but the right thing to do.

I hope this provided the clarity and confidence you need to control the way you view and react to what’s happening in the markets.

If not, give us a call.

Talk to us today



Source
The two most important things affluent investors can do for success is written by stuart.ritchie@aesinternational.com (Stuart Ritchie) for www.aesinternational.com

Previous Post

How to Use Envelope Budgeting to Increase Your Savings

Next Post

40 life lessons & personal finance

Next Post
40 life lessons & personal finance

40 life lessons & personal finance

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Newsletter

  • Trending
  • Comments
  • Latest
How many chips are installed in a car?

How many chips are installed in a car?

August 9, 2021
Millennials and Bank Branches: A Bad Match

Millennials and Bank Branches: A Bad Match

December 5, 2019
Inflation at its peak – what are the reasons?

Inflation at its peak – what are the reasons?

April 7, 2022
HSA vs. FSA Differences | Chime

HSA vs. FSA Differences | Chime

November 4, 2021
China’s Strict Zero-Covid Strategy Is Slowing Down Economic Recovery

China’s Strict Zero-Covid Strategy Is Slowing Down Economic Recovery

0
Millennials and Bank Branches: A Bad Match

Millennials and Bank Branches: A Bad Match

0
Retail Branches Pose an Existential Threat to Banks

Retail Branches Pose an Existential Threat to Banks

0
Why Rate-Chasing Doesn’t Pay – Wealthfront Blog

Why Rate-Chasing Doesn’t Pay – Wealthfront Blog

0
China’s Strict Zero-Covid Strategy Is Slowing Down Economic Recovery

China’s Strict Zero-Covid Strategy Is Slowing Down Economic Recovery

May 16, 2022
How to Plan a Wedding on a Budget

How to Plan a Wedding on a Budget

May 13, 2022
What is behind the recent crypto crash?

What is behind the recent crypto crash?

May 13, 2022
A Social Media Break Could Save You Money. Here’s How

A Social Media Break Could Save You Money. Here’s How

May 12, 2022

Categories

  • Banking
  • Budgeting
  • Markets
  • Wealth Management

Archives

  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • March 2020
  • January 2020
  • December 2019
  • November 2019
  • Privacy Policy
  • Terms and Conditions
  • DMCA
  • Contact Us
  • Whitelist

© 2021 All Rights Reserved impulsewealth.net

No Result
View All Result
  • Home
  • Wealth Management
  • Markets
  • Budgeting
  • Banking

© 2021 All Rights Reserved impulsewealth.net