Written by Brian Frederick CFP®, CIMA®
The End is Near!
For once, I wanted to lead off with an inflammatory headline. Before we light the proverbial fuse, let’s think about this. I have always posited that if the headline was “Everything is going to be okay,” no one would click, read, or engage with the message. Therefore, let the fireworks begin!
While the “End is Near!” is my attempt to cause a ruckus, does it or should it? It could be read with fearful intent, as I anticipate most people’s first take would be. It could also be received as “thankfully, the election and all the mind-numbing rhetoric will finally slow down. Maybe we can move on from this sordid affair sooner rather than later.”
I get the sense that for the vast majority, there will be a great sigh of relief when this is behind us. Election-fueled emotions have been stoked by the media, the politicians themselves, and seemingly anyone with a platform. Generally, they have fanned the flames of fear rather than fostering the spirit of what is possible in our own homes, communities, and our great country as a whole.
Moving beyond the “blame game” is hard. Developing a well-thought-out plan forward is a much deeper and more difficult conversation and one that I encourage you to explore with friends and family (just not at the Thanksgiving table). Thankfully, the purpose of this note is not to delve into politics, but to focus on the power of planning and how to not just preserve your wealth, but to grow it.
It has been said that the stock market is a massive voting machine that is guided by two emotions: greed and fear. I suggest that it is really just “fear.” Fear of losing money and the fear of missing out. That last one is so popular now that it has its own acronym, “FOMO.”
Over the years, there has been a lot of research on what moves markets. At first, the economists thought every investment decision would be “rational.” Each person would carefully weigh all known pieces of information before deciding what to do with their money. Anyone who has ever worked hard for their money realizes it is not that simple. Thus, “Behavioral Finance” emerged, focusing on the biases influencing people’s decision-making. If everyone was always 100% rational, things would be so much easier. But that is not reality. Instead of blaming people for not being machines, the real question is how to make better decisions that stack the odds in your favor and take advantage of other people’s emotional swings.
The power of planning and the customized perspective that it provides help determine an appropriate course of action. An investment plan based on “tried and true” principles helps protect us when emotions run high.
Here are several key tenets that we have integrated into our investment process that add value over time:
- The future is never as clear as the past. Hindsight is 20/20 and the events that drove markets previously are rarely expected nor easy to predict. The past is never as clear as hindsight would have us believe. Mainspring Wealth Advisors invest based on your goals, needs, resources, and ability. We try to balance your risk and return given an always un-certain future.
- The only person who does not need to diversify their investments is the person who is right 100% of the time, all the time.
- Buy low and sell high is easier said than done, but our rebalancing process does just that.
It can always be said that these are uncertain times. While we cannot control the election, inflation, wars, interest rates, the economy, or any myriad of things, we can harness the power of planning, process, and align the portfolio to help. Let’s focus on what we can control versus what we cannot. That can help quell the fear and anxiety that is so pervasive today.
In just the last 25 years, the United States of America has shown amazing resilience and led global recoveries. Great examples of this strength are recovering from the Tech Bubble bursting, 9/11, the housing bubble bursting, the Global Financial Crisis, the European Debt Crisis, and the Global Pandemic. There are many other nerve-wracking moments that were big at the time but didn’t make the list. American history is full of astounding feats, and I expect nothing different this time.
Personally and professionally, I have seen firsthand how resilient people can be. People are surprised at how much they can withstand and overcome if needed. Rarely are things as good or as bad as feared, so it pays to focus on your own plan and put the work in as needed.
To bring this to a close, the end of this chapter is nearing, but the American story will continue. As part of your financial planning team, we are here to help you write your own adventure.
Please reach out with any questions. We are here to listen, learn, talk, and act.
