Now that most investors have a substantial period of recent bear market experience to draw on, I would suggest examining the methods that you will use in the future to grow your assets. I teach my clients to view their investments and financial life as a business. Our goal is to use the same principals and methods in our investing that help businesses to be successful and thrive year after year. You need to envision your investments and wealth building strategies as your own financial company.
The mantras of "buy and hold", asset allocation and dollar cost averaging have been bruised in the bear market, but many still believe in the concepts. But if you examine these methods compared to what has made our country great, you may begin to realize that you have been sold a story that destines you to mediocrity at best, and as many have learned now, failure. I would like to suggest that you think of your investing and wealth-building strategies in the context of what has made our country the leader it is today. I think that using the same methods that caused America and its industries to flourish can lead to similar success in your investing.
So let's consider the traditional methods listed above. We are advised to give our money with no questions asked, spread it around, and just keep putting it in, no matter what. And hope that it grows. My skepticism of these methods is based on the fact that markets can do three things. They can go up, they can go down, or they can go nowhere. These methods only work in the first of the three possible outcomes. For me, one out of three is an unacceptable probability of success. But now, let's compare these methods to doing things the American Way.
Our country has a proud history of constantly striving forward. We may stumble, but we are always driven to pick ourselves up, dust ourselves off, and keep moving. We have focused our strengths where it has done the most good. Always searching for a better way of life in a free society. We also understand that there are times to assert ourselves, and times to lay low. I believe it is the individualistic and entrepreneurial spirit that has brought us to our position at the head of nations.
So, why then would it make sense to run your investment business in exact opposition? Just like our country, you are operating in an environment that is constantly changing. Does it honestly make any sense to you to just sit tight and hope for the best? Where would the US be today if we ran our country or corporations in the same manner we're told to manage our investment business? Where would our best companies be if they weren't constantly seeking to control their risks and then produce superior profits?
And where is that good old American skepticism? Is it our style to just go along and blindly trust that everything will be ok? We are a nation that moves forward based on initiative. We monitor our methods and our allies to track our progress and to keep us from being blindsided by the unexpected. We focus our attention where it is needed to continue moving forward. We understand that as things change, we will need to be ready to change also, or relinquish our position as a leader. Doesn't this all make sense for your investing business also?
I believe that it's ridiculous to think you can't do anything about the outcome of your investment business. Just as in running a company, you must address the risks you will take, manage them as best as you can, and then use the techniques that have the highest probability of success and profitability at that time. Focus on what you can control, instead of what the media and financial institutions are telling you. Find advisors to work with you that understand profitability and moving toward your goals. The advisor gets paid whether or not you're successful. You don't. And if they're not making the money necessary for your investment business to reach your goals, you should fire them.
Embrace investing the American way. You won't win every battle, but you'll always know what you're trying to achieve, and you'll have a much better probability of success. And a lot less stress!