Faith rarely gets mentioned when discussing how to successfully invest for retirement. I’m not referring to faith in a religious sense, but faith that the markets will go up over time, albeit with temporary and sometimes drastic pullbacks.
Ironically, as the market is still near record highs, pessimism, skepticism, and nervousness continue to be the prevailing sentiments.
Virtually everyone I know has significant skepticism with regard to current market values. And it’s understandable especially with the day to day news cycle.
In fact, just the daily news from Washington has kept a lot of investors on the sidelines since the election. (A period of time that the DJIA has gone from 18,332 to a closing price of 25,007 yesterday.)
Don’t get me wrong, there are plenty of other reasons outside of Washington to be concerned according to TV pundits. Valuations, fraud, concern over the sustainability of corporate profit margins, bond bubbles, interest rate increases, student loan debt crisis, federal debt crisis, race relations or simply because we’re near all-time highs.
I’m not saying that any or all of those aren’t valid reasons for concern. Each one can be supported with very compelling stories. After all, pessimism still sells better than anything else.
But when it comes to planning for a potential 30-year retirement, you have to maintain a big picture perspective. Over the years, I’ve been accused of being an optimist. I could be called a lot worse for sure. But the truth is that I have no idea which direction the market is going to go on a day by day, month by month, or even a year by year basis and I never claim to know.
What I do know is what the market has historically done.
And knowing that successful investing is a decades-long endeavor regardless of where you fall on the age spectrum, you must have some faith in the future. You don’t necessarily need to be a rose-colored-glasses-optimist.
That being said, I’m not sure where faith in the future ends and optimism begins, and I’m not sure it matters. But I know that faith in the future is critical to your portfolio’s long-term success.
Faith in the future that we will keep innovating. And that this innovation will create new and different jobs and opportunities.
Faith in the future that those innovations will bring costs down and make things available to people worldwide that were never available before.
Faith in the future that we’re extending our own lives via amazing research in the medical space.
Faith in the future that we will eventually solve our energy problems and perhaps even climate change.
Faith in the future that as each day passes, fewer and fewer people are living in poverty than ever before.
Faith in the future that you have a place in this world and that our fellow man is inherently good.
Faith in the future that our children will live in a better world than we do today. (As a father of two young sons, I have a lot to say on this.)
Faith in the future that the markets will go up over time due to a multitude of reasons that don’t always make sense.
Faith in the future is a foundational concept to successful investing, and yet it receives little attention. So many focus on asset allocation and charts. And I’ll admit that I love that part of my job.
But if you refuse to believe that the market will continue to move higher over the next 10/20/30 years, then it is going to be extremely difficult to plan financially. I honestly don’t know how one might make successful long-term portfolio decisions with a long-term pessimistic viewpoint.
Faith in the future is as essential to your long-term portfolio as oxygen is to us as humans. Because whether you admit it or not, without faith in the future, you’ll find yourself trying to find the right entry and exit points for various market conditions.
It will be difficult to ride out the downturns because you’ll be too busy telling everyone, “I told you so” and you won’t know when to get in again (if you were even in the market to begin with).
It will be difficult to embrace markets pushing new all-time highs since you’ll be waiting for the other shoe to drop.
Let’s face it, investing is hard, but successful investing without faith in the future is virtually impossible.
Below is a video by Hans Rosling explaining how the world has continued to change for the better. It will be five minutes well spent. Enjoy.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Ashby Daniels and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any opinions are those of Ashby Daniels and not necessarily those of RJFS or Raymond James. Raymond James is not affiliated with and does not endorse the opinions or services of Hans Rosling.
Join the Retirement Field Guide Newsletter
Subscribe below to get Ashby's list of the best retirement resources from around the web.
I am a Financial Advisor in Pittsburgh and a CERTIFIED FINANCIAL PLANNER™ professional with Shorebridge Wealth Management. I enjoy helping clients and readers find sensible answers to retirement’s big questions. If I can answer any questions for you, feel free to Contact Me or if you think you might be a fit for our practice, see Who We Serve.