A financial adviser friend came to the office for coffee the other day. He’s been in the industry for more than 20 years. He was telling me about some of his clients and the challenges they face as they get older.
Planning for enjoyment in their golden years. Family squabbles. Care requirements. Advice from adult children that is sometimes in the interests of the children, not the parent.
‘Life seems to get harder as you get older,’ I remarked.
‘You just build up more stuff. And that takes management,’ he reminded me.
Building a portfolio with a targeted dividend-income stream and targeted growth requires intentional and well-researched investing.
But, for many investors, the day-to-day volatility we have seen lately can be disturbing. And in the last 13 years, we’ve also seen two heavy and crushing drawdowns:
- The Global Financial Crisis in 2008
- The Covid-19 lockdown shock in 2020
You need to realise there will be another such drawdown around sometime soon. Markets go steadily up. But when they scare, they can crash.
Times of high volatility can be a sign that things are wrong out there. But they can equally just be choppy periods that we get through. And growth resumes.
investors who had the courage to buy at the bottom of the GFC or the Covid drop will have, over time, done very well indeed.
Compare the fears of smaller investors to experienced investors with a portfolio of $1,000,000 or more.
In a typical week — especially these weeks — they can be up or down by $60,000 or more. They come to see money as like the tide. It goes out, but it can come in as well.
And sensible, well-researched investing — managing risk and opportunity — can see a rising tide of wealth overall.
Of course, this perspective sharpens your financial mind. If you can be up or down $60,000 in a week, many other risks and losses of money in life don’t really matter very much.
It is a question of perspective. And when it comes to investing, perspective can make all the difference.
Right now, here are the two biggest factors that will determine whether you might potentially succeed as a long-term value investor…
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