Want to Travel? You Need to Unpack First

All of us have had the experience of traveling somewhere that is new and different. We have some expectations and beliefs about the place and we pack our suitcase accordingly. What if the journey and the destination are not at all like what we imagined? Well, your long-term financial goals (where you want to travel), and the journey to those goals (from where you are now), can be full of surprises. Many of these surprises originate with our own misconceptions about what to anticipate along the way.

For the main, by way of experience, education or human brain wiring, most of us are not well equipped for the financial planning journey. We believe what we want to believe…despite evidence to the contrary. We believe that our financial future depends mostly on how well we pick stocks in our 401-k; We believe that the markets are rigged and eventually, everyone loses; We believe it’s better to stay in cash, because what we lose to inflation is likely less than what we might lose in the stock market. These are common beliefs but are all financially damaging misconceptions that need to be unpacked from our suitcase before we can make real progress.

Many people come to us ostensibly looking for a portfolio. They have been using a broker, or even another fiduciary advisor and they simply want more return from their portfolio. After all, the investment portfolio must be the key to wealth wellness, right? Well, actually that isn’t even close to being correct. While there are ways to orient your portfolio to capture financial market returns consistently, this does not mean that these returns can be controlled. Investing is future based and therefore uncertain. This runs contrary to the desire to engineer or control outcomes. To have a good journey, you have to unpack this central misconception from your suitcase. Otherwise, it will sabotage everything else that you do along the way. Remember, your desired returns are distinct from your required returns.

Financial markets are an excellent example of capitalism and how it can impact everyone within society. Markets provide a mechanism for companies to sell investors shares of ownership. These shares, in turn, provide a claim on a piece of the profits from the underlying enterprise. On an average market day, over 98 million trades take place in global stock markets. These millions of participants use real time information to set current prices. These prices are the best estimate of the value at any given point in time. To move towards financial well being, we have to embrace the power of the markets.

Long term investors, (and really all investors are long term, or else it is speculation), understand that inflation is the primary enemy to lifetime wealth wellness. Every day that you are sitting in cash and not invested in stocks is a day that you lose money, net of inflation. Coming fully to grips with that duality is far more a behavioral/emotional issue than it is a financial issue.

The benefit of unpacking these misconceptions from your luggage is that you are now far better equipped to enjoy the trip without undue worry or stress. Do you want to take a trip? Ready for a real conversation?

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