Life is filled with risks. While stock market, economic, or political risk is widely discussed in the press, there are other risks that financial advisors and clients must consider. One of the biggest and most uncertain risks has to do with the future high-cost medical care that is not covered by insurance. This is the care you may need if you have a prolonged physical illness, disability, or severe cognitive impairment. These limitations can prevent you from performing basic activities such as bathing, dressing, and eating. Help for these types of needs is called long-term care and can result in the biggest expense shock a retiree can face.
In my last blog post, I discussed Faith in the Future as the first key to investment sucess. The second key is Patience.
Key #2 - Patience
Some investors don’t lose faith; they simply lose patience. Patience is the ability to wait and delay expectation of positive returns. Patience is absolutely necessary because positive returns are not provided each and every year, and may not even be provided for many years. While I know it may be almost un-American to be patient in our world of instant gratification, news feeds, and credit cards, it is patience that is a necessary characteristic of a successful investor. There are two methods of obtaining more patience when it comes to the markets.
Investment Success can be thought of as the reward that awaits you within a vault that must be opened using four key codes. To open the lock to the vault you must turn to each of the four key codes in order. Only then will the wheels of the lock align allowing the vault to be opened. Then investment success will be yours! In today's blog post, I will introduce the first key: Faith.
Key #1 - Faith in the Future
The first key needed to obtain investment success is to have a resounding "faith in the future". This is faith in the growth and progress of economies, businesses, and people (who work and own these businesses). When you invest, you are buying a piece of a business. Therefore, you would only invest in that business if you felt that the business would make money in a conducive environment. Taken further, as globally diversified mutual fund investors, you are buying ownership in businesses around the globe, and therefore, you have a stake in the entire world economy - the economies in which these businesses operate. You would only own these investments if you felt these economies would grow over the long-term. This is faith in progress, not perfection. People, businesses, and politicians are not perfect, but if you take a step back to look at the upward curve of progress it is easy to have faith. If you can't see this progress, and are fundamentally afraid of the future (and have lost faith), it is impossible to invest successfully.
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