We’ve all heard of the power of positive thinking, but imagining failure is one of your best tools for achieving financial planning success. Certified Financial Planner Paul Fain, president of Asset Planning Corporation, explains this week on WBIR.
IT’S NOT ENOUGH TO HAVE A SOUND, LONG-TERM INVESTMENT PLAN…
- You need to stick to that strategy. (Not sticking to a strategy is one of the main reasons investors often fall short).
- Certain sectors will boom. Certain sectors will bust.
- Stocks will tank. Bonds will tank.
In the face of those natural ups and downs, it can be hard to resist second-guessing a strategy and changing it.
IN FACT, INVESTORS CONSISTENTLY UNDER-PERFORM THE MARKET RIGHT?
The S&P 500 Index returned an average of 5.62% annually between 1999 and 2018, while the average equity investor’s return has been just 3.88%.
WHAT MISTAKES DO INVESTORS REPEATEDLY MAKE?
- Reacting to hot trends,
- Panicking during down markets
- Making deposits and withdrawals at the worst times
HOW CAN IMAGINING FAILURE MAKE US BETTER INVESTORS?
- Imagining failure helps us better foresee the obstacles that might get in the way of success.
- The better we are at predicting the hazards in our path, the better our chances of avoiding them.
- Mental time-travel from both potential destinations: success and failure.
FAST MARKET FACT: Bond Investors vs. The Bond Market.
- Average Fixed income investor – 0.22%
- Bloomberg Barclays U.s. Aggregate Bond Index – 4.55%
QUESTION FOR OUR MONEYMAN?
Want to learn more about long-term investing? Do you have other general questions about financial planning or investing? Send your questions to our Knoxville Certified financial planner Paul Fain or directly to Paul@assetplanningcorp.com!