Here’s a question for you to ponder: Do you take a long-term view or a short-term view?
The proper outlook is going to depend on the situation. If you are like me and still haven’t got your winterizing done, a short-term focus is appropriate. This beautiful October weather will not last forever.
But that’s not what I am talking about today.
If you are like most people, one day you will want to stop working. For discussion purposes, let’s say that day is 30 years from now.
So, are you doing anything about that?
People with a short-term view are not. They know that one day they want to stop working, but they don’t spend a lot of time thinking about the future. They think about the present. Maybe they think the future will look after itself?
But that’s not what I am talking about today either.
I am talking about the very interesting, very common, often misguided, phenomenon when people take a short-term focus on their long-term objectives.
Here’s what I mean. When it comes to your retirement savings, are you thinking about where the money is going to come from when your paycheques stop or are you thinking about the headlines of the day? Because they are most definitely not the same thing, and – here’s the kicker – often they are not even related.
Yes, I do understand that these are interesting times. Right now, we are dealing with remnants of a global pandemic, the worst inflation in 40 years, the worst performance in the bond market in 40 years, absurd levels of government debt, global energy insecurity, and a military conflict with nuclear risk.
It’s easy to be distracted by headlines, and these ones are certainly distracting.
But let me ask you a question: Do you remember the headlines of the day from five years ago? How about five months ago? How about five days ago?
Most people will not remember the headlines of the day, and the reason for that is that headlines are often about temporary events.
Now, here is another question. Do you know where the Toronto Stock Exchange was 30 years ago?
I’ll tell you. On November 1, 1992, the TSX was at 3,335. Today it is at 18,931. That’s a 560% increase in 30 years.
Importantly, a lot of significant and terrible world events occurred over those 30 years. The uncertainty of Y2K. The Tech Wreck. 9/11. The Great Recession. The pandemic. Etcetera.
And yet over that period, the Toronto Stock Exchange gained 560%.
So, let’s say you are 30 years from retirement. What are you going to focus on? The headlines from October 2022, or a 560% increase over 30 years?
Because here is the thing. All these events of the day – the remnants of a global pandemic, the worst inflation in 40 years, the worst performance in the bond market in 40 years, absurd levels of government debt, global energy insecurity, and a military conflict with nuclear risk – these events have meant that investment markets have come down in price. Some high-quality investments are trading near their 52-week low.
Every time this happens some people fall victim to the headlines. They will be so distracted, so fearful of an uncertain future, that they will sell their investments. Maybe even sell them at a loss.
But not everyone.
Some people take a long-term view of their long-term investments. Some people will look at the TSX, despite a 30-year run of unsettling events, still gaining 560%. Some people will look at high-quality investments trading at a 52-week low, not with trepidation, but as an opportunity to buy when things are on sale.
If you have a short-term view you are going to focus on the headlines. If you have a long-term view you are going to focus on the opportunities.
The question for you is, are you a victim? Or are you an opportunist?
Brad Brain, CFP, R.F.P., CIM, TEP is a Certified Financial Planner in Fort St John, BC. This material is prepared for general circulation and may not reflect your individual financial circumstances. Brad can be reached at www.bradbrainfinancial.com.