How often do you worry about things you can’t control?
Or things that don’t matter?
We’re all human at the end of the day…
But isn’t worrying simply irrational and counterproductive?
I’ve spoken about Carl Richards before.
He is one of my favourite financial writers…
Who has a knack for simplifying important concepts…
And using clear sketches to further illustrate.
Here’s one of them:
This illustration clearly shows the small percentage of what we should focus on.
After all, things that matter aren’t always within our control.
Things we can control, don’t always matter.
If you made a list of things that mattered in investing…
You’ll find most of them are within our control…
Things like asset allocation…
The fees we pay…
Our behaviour…
Having the right financial planner…
And deciding when to start investing.
But there’s something we can’t control…
Yet matters a lot…
And that’s the market.
We spend so much time worrying about what’s happening in the market…
When, realistically, it’s totally out of our hands.
Instead, we should funnel our energy on things we can take charge of.
It’s only natural that we’ll be concerned if stock prices fall.
Any good financial planner will put your mind at ease…
By rebalancing your portfolio to reduce risk…
Reassuring you of your long-term goals…
Or helping you to recognise any irrational decisions.
Volatility is just a standard deviation…
Which is risky in the short term…
But not the long term.
All investment portfolios require a certain level of risk…
Your financial planner should make sure that it’s at a level you’re comfortable with.
So, if any short-term volatility happens, you should be able to handle it.
Ideally, even ignore it.
It’s something we do as humans…
We look at the recent past and project that indefinitely into the future.
This particularly happens when the events have been negative.
I recently spoke to a client who 'called the top' of the market in 2011 and has sat in cash ever since...
Missing out entirely on much of the longest bull-run in history.
Too fearful to get back in.
Whilst his capital was eroded by inflation.
Maintaining an unbiased view is difficult.
Especially when you need to be impartial about your own emotions, behaviours and decisions.
An ethical financial planner will help you with this.
And remind you that past performance is never a true indicator of future gains.
Perfect is the enemy of good.
It’s also the enemy of satisfaction.
Nothing can ever be perfect (at least not for long)…
Because things change.
Striving for perfection is an impossible endeavour.
Your investment management should simply be efficient…
Align with your long-term goals…
And give you peace of mind.
It doesn’t need to stick to the rulebooks of asset allocation…
Because, at the end of the day, that may not be right for you.
It may not work for your ‘bigger picture’.
Remember what Vanguard founder, Jack Bogle said?
“There may be investment solutions better than this, but the ones that are worse are infinite.”
Find a financial planner that will remind you to focus on the right things.
Who, when the markets fall, will have your best interests at heart.
If you’re still looking for one, give us a call.