June 5, 2020

Investing Principle #3: Invest for the Long Term

With the recent market volatility behind us and a more stable investment world, we now return to our regularly scheduled show: Investment Principles You Should Know.

Over the last nine decades, the U.S. experienced 9 bear markets and 15 recessions or depressions, wars, pandemics and any number of crises big and small. Yet markets have shown a remarkable ability to reward the patient, long term investor.

We must keep this long-term horizon in perspective when judging the success of our portfolio and the financial plan it supports. It is like smoking a 15-pound brisket for a family BBQ. Because a 15-pound brisket takes 10 to 12 hours to cook, we do not measure success by opening the smoker every few minutes to see how things are going “If you are looking, you aren’t cooking”. Instead we give the smoker time to work, checking only periodically to make sure everything is on track and to make any necessary adjustments.

When it comes to your portfolio, don’t judge success on a quarterly or even an annual basis. Instead, focus on how you are progressing towards your goals, including any life changes that may impact those goals. This helps you stay focused and and prevents short-term market fluctuations compromising your future.

Trust the process and don’t open the smoker all the time.