Gaining Perspective

Life is cruel. It usually does bad things to people when they least expect or able to cope. Take the markets and how they built expectations this year and just as investors anticipated getting a bit more to where they were the rug was yanked from under their feet and suddenly it was losses that were recorded and not gains.

Some investors called and expressed how this seemed to be cruel and unusual of the first order. I agree except the problem is that investors are confusing investing with trading and doing one while being pummeled by the other.

Investing is like baseball. It’s a game that has no rules on when it is over. It just keeps on going on and on.  The odds always favor investors when they approach it as a long-term hold. That’s why it’s called investing and not gambling or trading.

Let’s say you started investing in 1980. I would venture you have more money today, even with three major recessions in the last decade than when you plunked your first dime into a mutual fund. There probably isn’t more than a handful of  gamblers that can say the same. There were some past great investor years and some horrific ones.

But trading is a much shorter and well defined game. It starts early in the morning pretty much every workday and wraps up by late afternoon, unless you want to trade after hours. You know immediately how much you lost or gained by the end of the trading day. You could conceivably start with your entire fortune in the morning and by noon be broke. Some traders even are able to get filthy rich, but they take the risk of losing it all. Investors never do that.

Long term investors don’t know how well they will do or when and the purists of that genre don’t really care. The true investor understands that there will be days, weeks, months and maybe years that they will have their ears beaten back. But, give them time, allow them the opportunity of hanging around those markets and something magic happens – they earn more then in just about any other savings method.

Investors are not the only one’s who complain. I hear the same complaints from people about their real estate. My home, they exclaim, is barely worth what I paid for it. It doesn’t matter that they have no plan on selling, leasing or moving. They would just feel better knowing their pile of bricks is worth more or greater than it was the year before. They would not sell or move because their home is worth less today then when it was four years earlier. People just like knowing where they stand. It’s human nature.

Investors have patience. They take advantage of down markets by making sure their dividends are reinvesting and if they have spare cash they go against the grain and  buy what is being laughed at. The really great long-term investors have an Asian discipline. Traders do not.

Traders are like card players at a casino. They want the dealer to hurry up and deal because the more hands played the better their chances of making money. They also have a better chance of losing money, too.

I am willing to state that five years from now everyone who reads this and is an investor will have more assets under management then they have today. I also think that home values will be higher but not as high as they were just before the bubble. In the meantime you may as an investor complain to your heart’s content but just remember you’re complaining about something when you’re not playing the same game.

If you have questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.