Patience, Discipline and Reality

Wednesday, November 20, 2019

Patience, Discipline and Reality

For those of you who live in Southwest Michigan, you understand Winter arrived a little early this week.  If you don’t live in our area, some of our lakeside communities received in excess of 18 inches of snow.  What struck me as I drove my son to school that morning was the number of cars in the ditches and accidents that had taken place.  I admit that my first thought was how could so many first-time visitors to Michigan be driving on the roads that morning.  Then my next thought was no, these are just locals who have completely forgotten how to drive and simply did not want to face reality that snow has come early this year.  Driving in Michigan in the winter without incident requires you to use three things; common sense, patience, and discipline.

This experience influenced me to focus on some core principles as I begin to have year end reviews with my clients.  Our firm has always believed there is no such thing as market timing.  In my opinion and in my experience, it never works.  My experience in working with individuals and families over the last 30 years is that creating financial independence takes the same three things to successful driving in a Michigan winter: It takes common sense, it takes patience, and it takes discipline.  Think about the concept of common sense.  When it comes to investing the first part of common sense is having realistic expectations.  If you are new to investing or an experienced investor thinking that you are going to average 20% annual returns is simply not realistic and defies common sense. 

I mentioned above that trying to time the markets when it comes to investing simply does not work.  It is my opinion that time in the markets is what helps create financial independence.  The ability to stay in markets requires patience.  Think about how the year 2018 ended!  The return of the S & P 500 Index from October 1, 2018 through December 24, 2018 was a negative 19.32%.[1] [2] Did you lose patience at that point and sell?  If you did, have you made the decision to get back in the markets?  The return of the S & P 500 Index from December 26, 2018 through February 28, 2019 was a positive 12.84%.[3]  Besides being patient and thinking long term successful investing requires discipline.

If you are still working and are contributing to a 401k plan you understand this concept.  Each pay period you are contributing money to your investment for you long term future.  When the market has a pull back you don’t stop investing.  You are dollar cost averaging your money into an investment over time.  If anything, when the market has a pull back you should think about investing more at that point in time.  If you take the time to sit down with an investment professional and prepare a written plan that outlines on how you can reach your long-term goals, you should have the confidence in your future success.  If you show patience, have a discipline to stay on task, and use some common sense, the odds are in your favor or reaching financial independence.

 

[1] Yahoo Finance, S & P 500 Charts

[2] You can not directly invest in an index.

[3] Yahoo Finance, S & P 500 Charts

S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.

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