As Halloween approaches every year, haunted houses sprout across the land. Their purpose is to surprise and scare you, to provoke fear and screams and chills. Sights and sounds and sensations are all used to create the illusion of horror and danger. People pay money for the experience.
We were reminded of this recently, listening to promotors of a canned sales pitch that began, “With all the uncertainty in the market…” The peddler’s aim was to create a sense of fear and danger about long term investing. The pitch seems cynical, since it is alleged to be appropriate in all market conditions.
People who succumb to scare tactics pay for the experience, too. The costs may be in foregone gains resulting from stagnant investments, or higher expenses from products that purport to provide stability.
A member of the best group of clients in the world (our opinion) told us recently about her response when another financial type promoted the fear of market uncertainty to her. “What market uncertainty? There is certainty in the market. It is certain to go up and down.”
Accepting volatility as an integral part of long term investing has been quite liberating for this person. She has been through market cycles, up years and down years, and she knows how it works. She lives a vibrant life in retirement, filled with sports, activities, friends, and travel. Worrying about things that cannot be changed does not fit in to her life.
One of the keys to her comfort is understanding that account balances are not what buys the groceries–cash flow does. Knowing where the cash is coming from allows her to live with the ups and downs of her account value. She keeps track of where she started, so she understands the magnitude of her cumulative gains over the years.
We are not saying that our approach, our philosophy, is right for everyone. If you prefer to believe the markets are scary, you may—it’s a free country. We are talking to our clients here, not debating those who disagree.
Clients, if you would like to talk about this or anything else, please email us or call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.