Grow Assets By Delaying Gratification

The reason we invest is to grow our money — and the way to do it best is by delaying gratification. We know that because of historical experience. We also know that risk and reward are related. 

If we turned the clock back to 1970 and had the ability to make a one-dollar investment in different vehicles, by now we would see a variety of dollar amounts in returns ($1 dollar invested in the following turned into):

  • US Small Cap Value: $1,007 
  • S&P 500:  $154
  • International stocks: $120
  • International Small Cap Value: $1,033
  • Treasury bills: $9 

Unfortunately, money does not necessarily grow in a straight line. There are times when your return can be pretty flat or even down at times.  Every asset class will have some disappointing times and some fantastic times. Unfortunately one can’t predict when that will happen; however, that doesn’t matter because the power of the markets works for patient investors. There will be future unanticipated scares in the market like COVID — the markets went down, but it was also unanticipated that it would come back so fast.

My message to clients is to take a long-term view. Try not to get caught up in the details of recent asset class returns. Every investment-type style (such as the US or international style) has had its day in the sun. The unfortunate thing is that you don’t know when the cycle is going to happen. That’s okay — if you own a diverse portfolio.

Gambling, on the other hand, is a stressful way of life. At least, that’s what we hear from our clients. Let’s focus on investing, not gambling. After all, the only gambling stories we hear about are from the winners. The losers don’t talk. A successful investment experience using financial science to guide the way promotes less stress. Let time be your friend, not your enemy.

Jeff Holland | VIAIV

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