I saw an excerpt from a speech given recently by financial industry author/observer Nick Murray where he said, “The ride is the reason for the return”. That sums up nicely the message that we continuously impart to clients. Volatility is not the same as risk but price movements are the reason for positive long-term returns from stocks.
Many investors think that there must be a “magic” way to avoid “the ride” without sacrificing return. Countless TV and radio advertisements make this promise. The reality is mostly these are insurance products with huge front-end sales charges, back-end fees and ongoing expenses which limit their effectiveness. These investment marketers know how strong the attraction of returns without risk can be and they exploit this in their messaging.
Remember, there are 3 primary enemies that you need to engage in order to have a successful long-term investing experience. They are: 1. Inflation (3%/per year inflation doubles living costs in 20 years); 2. Behavior (your own distractions); and 3. Neglect (lack of concrete action). Two of the three enemies (behavior and neglect) are within you control. Historically, the most reliable way to defeat the one outside your control (inflation), is through a low cost globally diversified portfolio of companies (stocks). Prices change constantly with new information. Don’t fight it, embrace it and enjoy the ride! Ready for a real conversation?
When you call or come in for meetings you will notice some new voices and faces. Just this week we welcomed two new interns, Halle Hughes and Sam Morrison. Both are finance students at U.S.C. Sam is the younger brother of Brooks Morrison who interned for us a couple years ago. Also, next month Erin Sweatt will be joining us as a financial planning assistant. Erin is moving here from the University of Georgia in Athens where she is finishing the financial planning degree program. She plans to sit for the Certified Financial Planner exam in November.