I'VE BEEN PONDERING

With the stock market hovering around all-time highs again (see 2023 returns below), it's natural to wonder what's next. Will the market continue to climb, or will we experience yet another decline?

If we follow the constant doom and gloom headlines, we're likely to believe that it will be the latter. Of course, the truth is that nobody knows, which of course offers no comfort whatsoever.

But negative headlines are a dime a dozen no matter where the market stands at any given moment. I mean, how many times can they print some version of the headline, "Expert Who Correctly Predicted the 2008 Crash Shares Dire Warning"?

It's wise to look at headlines like that and repeatedly tell ourselves (or allow me to tell you) to "be patient" and "think long-term," but it's an entirely different thing to actually be patient! Morgan Housel speaks to this point in his new book Same as Ever when he notes,

"Saying you have a ten-year time horizon doesn't exempt you from all the nonsense that happens in the next ten years. Everyone has to experience the recessions, the bear markets, the meltdowns, the surprises, and the memes. So rather than assuming long-term thinkers don't have to deal with short-term nonsense, ask the question, 'How can I endure a never-ending parade of nonsense?'"

I love that phrase, "a never-ending parade of nonsense," because that's exactly what headlines are. But we need an answer to Housel's question if we want to be successful investors, and I think James Clear provides a helpful starting point in his book Atomic Habits:

"When scientists analyze people who appear to have tremendous self-control, it turns out those individuals aren't all that different from those who are struggling. Instead, 'disciplined' people are better at structuring their lives in a way that does not require heroic willpower and self-control. In other words, they spend less time in tempting situations.

The people with the best self-control are typically the ones who need to use it the least. It's easier to practice self-restraint when you don't have to use it very often. So, yes, perseverance, grit, and willpower are essential to success, but the way to improve these qualities is not by wishing you were a more disciplined person, but by creating a more disciplined environment." (emphasis mine)

In other words, let’s not beat ourselves up for having poor self-control; instead let’s structure things so we don’t have to call on our self-control!

One of the primary goals of financial planning is to establish an environment where making sound financial decisions is easier than it would have been otherwise. With regard to investing, this means we should create the conditions that make patience an easier choice.

How do we do this? The best way I know to foster patience with our long-term investments is to set aside the money we know you're likely to spend in the near term, along with what you might need if the shizz hits the fan, so that you are not as exposed to the possibility of your account going down when you need the money.

The desired side effect is that by setting those short-term funds aside, you will hopefully be less likely to sell your long-term assets at inopportune times.

Another way of thinking about this is to remember that we hold short-term assets (like cash in the bank and high-interest savings accounts) for your near-term goals and long-term assets (investments) for long-term goals. Remembering this distinction might help us mentally prepare for whatever comes next.

Because, in the end, helping you make smart financial decisions through the twists and turns of life, and the "never-ending parade of nonsense," is what our planning process is all about.

TIMELY TOPICS

Toward the end of 2022, Wall Street "experts" from big-name firms offered their thoughts for what 2023 had in store and most forecasted a negative year for the market. As you can see from the returns below, they were quite wrong as the market finished the year with a positive 24% return. Consider this another timely reminder that forecasts are meaningless—if not harmful—and that patience and discipline are the real drivers of investing success. (See patience article above)

RECENT SIGHTINGS

• ​I was recently quoted in an article on common mistakes people make when hiring a financial advisor.
• Rabbit, Rabbit video for January shared some ideas on “resolutions” you could do once but benefit from again and again!
• The most recent episode of our podcast Take Back Retirement features a deep dive into Social Security concerns for women and how to get the most out of it, with an expert guest.
• Coming up January 31 is an interview with Kathy Stokes of AARP about keeping ourselves safe from fraud. I mentioned her in last month's newsletter. Don't miss this valuable episode!

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Let's Connect!

How patient are you feeling these days? With yourself, your people, your goals and resolutions?

How about with your money? Money is emotional, though that is rarely acknowledged in the financial services industry.

What feelings do you experience most often around your money? How do you deal with them? [gif from that animated movie about feelings??]

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