Monument Resource Center
Our clients hire us because they recognize the value of our Team’s unique, straight-forward, unfiltered opinion and our tailored advice designed to answer their questions, not everyone else’s. Below, you’ll find some of the most important questions we have been asked over the years to help you better understand the role we play and the advice we give.
Understanding your investment time horizon is a key component of success in the investment world because it’s the period of time you expect to hold an investment strategy until you’d like the money back. Since the inception of the S&P 500, there have been zero rolling 20-year periods where (if you were invested solely in the S&P 500) you didn’t have more money than when you started. Similarly, there have only been four rolling 10-year periods where you were slightly negative or flat. Harnessing these long-term probabilities requires a certain level of discipline. The following tips can lend a helping hand.
Smart investors align their investments with their life goals and objectives.
Investors can certainly opt for short-term or intermediate-term investment time horizons, but holding investments for the long-term tends to offer the greatest potential for rewards. Below is a breakdown of typical time horizons:
- Short-Term: You have a short-term time horizon if you want to achieve a goal within five years, such as buying a home or vacation property. There’s also an ultra-short timeframe–about 18 months or less.
- Intermediate-Term: An intermediate-term time horizon is usually appropriate for achieving goals that are between 5 to 10 years into the future. For many investors, these can include investing for education expenses or creating passive income.
- Long-Term: A long-term time horizon is planning for goals that are more than 10 or 15 years into the future.While each situation is unique, a typical long-term goal includes retirement or legacy planning. Long-term investments tend to not only exhibit more volatility but also more return.
It’s essential to specify your investment time horizon because it affects your asset allocation. Asset allocation is the process of dividing an investment portfolio based on asset categories to balance rewards and risks to match your objectives. Setting a longer time horizon allows the allocation of a larger portion of your portfolio to assets that have higher risks, but a higher potential for reward because you have time on your side to correct for any dips in performance.
Smart investors focus on both interest and principal–this is particularly true for long-term time horizons.
Compounding both your interest and principal amount can have dramatic effects on your wealth over time. Think about it this way: you’re looking to increase your net wealth substantially in the long-term, yes? Then you have to play the long game. @thewealthdad, we couldn’t have said it any better ourselves.
Sean Cranston, [@thewealthdad]. (2021, May 27th). Since 1950, the S&P 500 has averaged annually:
• Appreciation ~7.2%
• Dividends Distribution ~3.6%
• Total Return ~11%
$500/month invested @ 7.2% return (30 years) = $634,612
$500/month invested @ 11% return (30 years) = $1,402,259
Yes…dividends (reinvested) do MATTER. Twitter.
Playing the long game and focusing on the long-term proved to be a great lesson during 2020. We believe that focusing on the long-term will allow investors to not only avoid the inevitable speed bumps but also allow capital to compound. Patience and discipline are crucial here, and there’s no need to overthink beyond those key factors.
Smart investors use swings in the market to their advantage.
When there are setbacks
Drawdowns in the market are an opportunity to add capital to the aforementioned long-term upward trend for investments. Oftentimes, staying the course is the most beneficial option…even if it’s not immediately serving you.
Take February-March 2020 for example. The S&P 500 fell about 34%–and then the market eventually rebounded even further than its historical levels, benefitting patient, long-term investors who didn’t sell as well as investors who strategically bought when the market was down.
Our opinion is to consider long-term investment time horizons and then stay the course…because you don’t need to panic when the market swings if you still have another 10, 15, or 20 years until you need to access your investment. Historical performance has shown that you are likely to win over the long-term time horizon.
When there are sales
A stock is considered on sale when it is undervalued–when it has a share price that is perceived to be less than its intrinsic value. If you want to buy an undervalued stock, then oversold stocks can be great picks. A stock is oversold when an investor believes the mass selling of the stock has pushed the price lower than its true value. If you consider a stock to be oversold, then it could be the ideal time to purchase it while it’s in the bargain price range.
A great preparation tip for finding sales in the financial markets is to create a wishlist of your coveted stocks and patiently wait for that price to drop. You can set up alerts to notify you when this occurs. But do this with caution–individual stock investing can be a risky wager, so make sure to do your research! Remember, the marketplace is pretty efficient–when a stock is down significantly, there could be a good reason for it.
Smart investors get insight from experts.
Knowing your investment goals is a lot different than actually managing a profitable portfolio. And while you may have been burned in the past by your previous wealth advisor, that doesn’t have to be the case as you move forward. When you’re ready to have your options clarified and be provided with a hassle-free wealth management experience, our Team of trustworthy, financial mavericks is waiting with bells on.
We use a highly customized and collaborative in-depth approach to identify your risks and opportunities for rewards, which we fully communicate to you so you don’t ever have to feel alone in the dark. This process includes a full assessment of your current portfolio’s asset allocation as a part of your very own Private Wealth Design, which clearly defines each step we’ll be taking to meet your long-term objectives.
If you want to truly get smarter about your investing or at minimum get unfiltered (aka no bull sh*t) advice from seasoned pros in the financial industry–let’s meet.