Your New Year's Financial Resoultion

December 2016

As we come to the end of another year it seems appropriate for us to reflect on 2016 and be thankful for the good. Can we learn from the mistakes as we look forward into the next year excited to reach our goals? 

Looking back long ago when I started in this industry at the ripe old age of 23, I was looking for any kind of advantage I could get to offset my youth and inexperience. It was an old Jewish man in our office that I went to for help. Try to visualize the mountaintop experience with the old Chinese guru and young boy in all the movies. I was the “young grasshopper” excited to learn some supernatural words of wisdom from someone who's been in the industry for so long. 

I came into his office and approached him as he was slouching in his chair. I asked him what great advice would he give a young man starting in the industry he’s been in all his life? He stopped what he was doing, looked up and said “Why Dennis this is a piece of advice I give everybody: "buy low; sell high!"

I remember leaving his office dumfounded at his response. Was he joking with me? How simple is that?

Now 39 years later that simple phrase rings true more now than it ever did in my early career years. As we are winding down 2016 the stock market is approaching the historical 20,000 mark for the first time ever. It reminds me of a few years back when the market was strong and life was good. The year was 2008, eight short years ago, but many people forgot to sell high. Granted it fell fast and hard but many experts say it wasn’t a surprise. It wasn’t the first time the consumer reacted contrary to what the market was telling them to do. In fact, consumer reaction is something each investor needs to understand and fight in their own portfolio decisions. Look at the chart below.

As you can see the individual investor has left a lot of change on the table by buying and selling at the wrong times. This chart says a couple of things to me. That the markets don’t care about your personal emotions on when you decide to buy, hold or sell. Overall emotions can move the market but that’s a different discussion. The market is going to do what is wants regardless of your individual decision.

It also shows me that an advisor has a psychological responsibility in planning with their clients. To assist in being the calm amid the storm. To understand and educate a client through their unexpected challenges through life and the road to and through retirement.

I ponder that simple phrase the old Jewish man shared with me in his office. Buy low, sell high; means so much more now to me than it did when I was younger. It's not as simple as it sounds. How much better off would we all be if we succeeded consistently at that. Seasoned advisors can help you with that. 

The industry has also developed a method to automatically protect you in times of market downturns. I will discuss that in my next post. Happy New Year!