Financial Perspective Today: Blogger Challenge Day 5

Today, I've decided not to use the @projectdomino suggested prompt topic and to write about something I feel more passionate about.


To be successful in investing and build long-term wealth, one must have the proper perspective and frame of mind.

The financial markets have been choppy recently, particularly since the beginning of May. As we discuss financial matters with clients and prospects, many raise similar concerns.

People are concerned about many things: the economy in general, the price of oil, the US budget deficit and the national debt, overseas debt levels, unemployment levels, inflation, interest rates, etc. We share these concerns.

Some people look at all these problems and "decide" not to invest or make financial decisions now. This is not in their long-term best interest. As advisors, we recognize and try to emphasize the following perspectives:

We are realists, meaning that we understand these concerns, but are also long-term optimists. We realize that we cannot control these issues. We focus on the things we can control for our clients. However, we know that the US economy and the world in general can be very resilient, in the long run. Things tend to work out, over time. Consider the days and months after 9/11. We all shared huge concerns. Over the years, those fears lessened and travel and the economy rebounded. Resiliency.

We cannot predict the future. Thus, we cannot accurately predict the price of oil 3 months, 6 months, or 2 years from now. Thus, we cannot and do not make investment recommendations based on things that we cannot forecast.

We talk with our clients extensively, about any financial concerns they may have, both personal to them and/or these other outside factors. We then develop a financial plan and asset allocation policy that is appropriate for their personal circumstances. This helps them to move from "inaction" due to external factors to having a plan that they are comfortable with. This provides them with the ability to move forward, so they can be financially secure, and sleep well at night.

The facts prove that this is a good strategy, if you have the proper perspective and discipline. Staying on the stock market sidelines has not been a good strategy, if compared to a properly globally diversified portfolio.

The following figures may provide helpful perspective. These are for the S & P 500, which is an index of 500 large US companies. This is not a globally diversified portfolio, but useful to review.

2 years ago, June 2009        925

1 year ago, June, 2010     1,040

6 months ago                   1,220

June, 2011                      1,300


(Note: The above information for the S&P 500 is for illustrative purposes only and does not represent the financial performance of our firm or our clients.)