Each year, September marks key moments of change. Children and college students returning to school. Summer transitioning into Autumn. The next stage of a seasonal cycle that has us looking ahead to Halloween, the busy weeks of November and December, and then a new year just around the corner.
Cycles offer an apt metaphor, and an important reminder, when it comes to investments. Yes, financial markets are often discussed in terms of “cycles” of gains or losses. But it’s never wise to get too caught up in tracking (or trying to anticipate) those types of ups and downs.
For individual investors, the more relevant cycles are those tied to your life. We each experience our own seasons and cycles of change. When it comes to developing a long-term investment strategy that will evolve along with you, tuning into those cycles is critical.
While many of you keep general track of your investments – annually, quarterly or even more frequently – fewer spend time consistently reflecting on how changes in your lives may need to be accompanied by changes in your investment strategies. This is not just about the big, obvious shifts like “I started a new job,” “I’m having a baby” or “I moved to a new state.” These are important! But they’re also hard to miss and, thus, much more likely to be on the agenda when you connect with your investment advisor.
More subtle is how our goals tend to shift in important ways over time. If we are not intentional in taking time to reflect on how our priorities may have changed, and how that impacts our long-term picture, it’s difficult to align the right investment strategies.
As we move into the Fall season, here are a few thoughts to help you get more in tune with yourself and your investment goals:
- One of the most fundamental principles of investing is time. The timeframe you are investing for determines the kind of investment options you should consider. When rooted in something tangible, time can prove more meaningful. The key is to match the timing and cycles of your investments with the desired timing and cycles of your personal goals.
- Creating a long-term plan for your investments requires a long-term view of life. At Two Point Capital Management, we are committed to investment strategies that look to the long term. A core part of that process is building relationships with our clients so we can truly understand what matters to you now and in the future. This is not a one-time process. We suggest you repeat this conversation consistently over time to re-evaluate your goals and risk tolerance and to re-set priorities.
- Life rarely unfolds in a perfectly straight line. Nor do personal goals. Goals are often framed as some kind of linear march to a clear-cut finish line. In reality, many of our most important goals are far more organic than this. It’s true that some goals might feel like a box that’s been satisfyingly checked-off, like closing on your first home after years of saving. But others will unfold over time, like a goal to increase the amount you can give to charities as you build your own wealth. That goal may have a life-long time horizon with no natural milestones – other than the ones you create.
- Retirement is not an end point. It’s just one point along the way. Building funds for retirement is one of the core reasons many people invest. You are literally “investing for the future.” But this can lead to a common mistake in thinking – which is to view retirement itself as the goal post. In reality, it’s simply another shift into a new cycle of life. Old ways of thinking about investments post-retirement (such as living off the income of your investments, not the principal) don’t always apply today – especially in a low interest rate environment. And growing life expectancies can mean many years of living, spending and investing still to come, even after your retirement “goal” is reached.
- When your investment advisor asks “Has anything changed?” stop and really think about your answer. Share more than just the obvious highlights. Dig down to see if longer term interests or priorities have emerged that may impact how you should be investing. Did a special trip overseas spark a vision of your life, creating the desire to travel more extensively? Did attending a college reunion make you wonder about funding a new scholarship at your alma mater? Are you suddenly wondering about a career shift or early retirement? Though harder to pin down to a specific end point or date, these are the kinds of aspirations your advisor will be interested to hear.
Aligning investment plans with the cycles of your life and personal goals will lead to a more holistic strategy that has a much greater chance of success, as you define it. While it’s a process that requires reflection and ongoing discussion, it is well worth investing the time.
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