It seems each week I bash the Wall Street bullies. In my opinion this is well justified. This week I would like to discuss personal accountability. That is, not relying on someone else to take responsibility for your financial future. Many people are looking to the government to take care of them. These same people will not take responsibility for their own decisions. After all why should I save for the future when I know that the government will provide for all my needs?
It seems everyone is looking for some sort of guarantee. Americans have become dependent on someone else for every aspect of their lives. The 2008 crisis which followed the tech bubble of the early 2000’s has made many people afraid to take risks.
There is a tendency for Americans to believe that when times are good they will always be good and when times are bad they will always be bad. They are wrong on both counts.
Long term the equity markets offer great returns however these great returns do not come without risk. There is no way to avoid risk if you want to grow your wealth and keep up with inflation. Unfortunately investors have a tendency to go all in when markets are both good and bad. In good markets they will be 100% in stocks and in bad times 100% in fixed income/insurance/guaranteed products. This strategy is a huge mistake. Each investor has different circumstances and therefore should be at different levels of risk.
It has been proven that market timing does not work. However the media is good at keeping investors afraid and moving their money. The decisions investors make are seldom based on logic making market timing nearly impossible.
Americans need to get back to taking personal responsibility for their own future. This must include risk. Without risk there is little chance for a better life. Yes, at times the equity markets are uncomfortable. Sometimes they are very uncomfortable. We must again believe that the free market work. No matter how bleak the economy looks it will recover and better than before.
The equity markets are random and unpredictable . Therefore attempting to make decisions based on current conditions or forecasted conditions will lead to disappointing results, long term.
Does this sound like a matter of faith? Faith that the free market do work. Yes it is.
If the financial system completely collapsed I’m not sure what would happen to all assets. If we look back at U.S. history what was the confederate dollar worth after the American Civil War? What would guarantees be worth? Would insurance companies survive? Would the government survive? I don’t know. I have faith this would not happen.
This may sound scary but is it different from the financial pornography fed to us by the media? Yet after each crisis we recover.
Your best strategy is to have a prudent portfolio at YOUR level of risk and rebalance. In most if not all cases this would require the assistance of an investor coach. As in all endeavors when we make decisions based on emotions the results are most often disappointing.
An investor coach will provide process and discipline.
Become personally accountable for your own future with the help of your coach.