Well, this wasn't supposed to happen! - Part 2

As we approach the end of December, it's a good?time to reflect on how incredible the?year has been. As you can see from the following chart, 2024 was a blockbuster year for HNW Financial:?

Our?assets under management (AUM) have increased from $217M to $292M, an overall increase?of 34.6%! The?chart is almost a straight line up and to the right.

Of this $75M increase, $20M came from additional investments?from referrals and existing clients, and the other $55M was growth. It has been incredible! We all felt the torrent of dopamine that came from the S&P 500 hitting a new high 56 times, although hopefully, no one watched each one of these.?

The next obvious question is what will 2025 look like, and can we have another year like this? Please??

?Unfortunately, we have no idea what the?next few months or?year or?two will look like. Anything can happen over the short term. The good news is that the short term matters much less than most people think. The long-term is what's important, and our managers will continue to deliver pleasing returns over time. We work very hard to?maintain a properly diversified?portfolio of?some of the greatest companies in the world. We own different-sized businesses in various industries located all over the world and held in different currencies.?Some of these are tremendously profitable enterprises that no one has heard of (yet), bought at significant discounts to their intrinsic values. Others are some of the most loved and exciting corporations in the world and are?now household names.?

With such a beautifully crafted portfolio, what could go wrong??

The weakest link in the chain, the piece most vulnerable to cracking, is undoubtedly our minds. Each of us individually. Sometimes, it's easier to see things like this from a different angle. Here's an example from another area of my own life:

Over the past 6 years, our family has done quite a bit of rock climbing together, mainly at the gym, but we have been outside a few times over the past couple of summers. It's been a great sport to do together because we can be at dramatically different skill levels and still celebrate each other's wins.?

Recently, I started a course to work on my fear of falling. Climbing is a rare?sport where success is more or less equal parts?physical strength, technique and mental toughness. Of the three, my weakest link has certainly been my mind. I am fine with working hard but have not been comfortable falling, and it's impossible to climb one's best while terrified.?

This left me with two choices: either continue climbing only easy routes where mistakes are less likely or expand my comfort zone to accept that falling is part of the package.?

This course has essentially been a long cognitive-behavioural therapy session to teach my body that it's ok to fall. I started with tiny drops while working hard to stay completely relaxed and built up to larger ones with that same mindset,?training my subconscious that falls are both safe (if done properly) and welcome. We learn very quickly from one bad experience, but it takes a lot of positive ones to develop the understanding that falls are good. I'm not quite where?I want to be yet, but I've come a long way. It's been amazing how much correcting my relationship with falling has improved my enjoyment and ability to climb more challenging routes.??

I believe this translates directly to investing and is worth considering as we come off an incredible 2024 and look forward to the future. The returns earned from equities also come as a package. At certain times, we are gifted with awesome increases and at others, terrifying falls.? Fortunately, over the long term, there are many more ups than downs. These are inextricably linked, however, and when we make our conservative plan projections of 9% while working and 7% while retired, baked into those numbers is a correction of about a 1/3 (but sometimes more) every five years or so. It's impossible to have one without the other. Without the pullbacks, we wouldn't receive anywhere close to the same amount of success on the growth side.

Not only do we need the?falls, they are all part of the plan.?

We are very well-positioned for whatever comes at us going forward.?

We?want to wish you and your families a very happy, restful holiday and time to recharge before the New Year.