8 Timeless Principles of Investing

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Marissa Poissant, CFP® May 13th, 2024

In the fast-paced and ever-changing world of investing, it is as important as ever to remain grounded in these timeless principles. Understanding and applying these tenets to your investment approach can increase the likelihood of achieving your financial goals and provide a roadmap for navigating periods of volatility.

  1. Focus on What You Can Control: Investing can often feel unpredictable with factors such as market movements, economic events, politics, and interest rates constantly influencing markets. Rather than trying to predict such events, focus on what is within your control by building an investment strategy that reflects your personal goals, time horizon, and risk tolerance.

  2. Put Time on Your Side: History has shown us that the financial markets have rewarded long-term investors, as seen in the chart below showing the growth of various asset classes since 2000. Keep in mind, however, that past performance does not guarantee future results and individuals are not able to invest directly in an index.
  3. Tune Out the Noise: Although we live in an era of seemingly infinite data, information overload can cause even the most disciplined investor to question their investment decisions. Some headlines spark anxiety, while others may try to coax you into chasing the hottest trends, but it’s crucial to base your investment decisions on facts and not let market noise cloud your judgement.

  4. Don’t Try to Time Markets: When a market rally or a pullback occurs, many investors find themselves trying to identify a peak selling window or an undervalued buying opportunity. Unfortunately, investors are usually wrong and often miss out on the best days in the market. So rather than trying to time the markets, focus on your time in the market and allow your money to ebb and flow with natural cycles and grow over time.

  5. Understand All Forms of Risk: The risk associated with changing market conditions is just one factor that investors must consider when formulating a financial strategy. Determining your personal risk tolerance and understanding how it correlates with your time horizon and investing goals is essential to a well-crafted financial plan.

  6. Avoid the Emotional Roller Coaster: Investing is often likened to the ups and downs of a roller coaster, where market highs bring euphoria and downturns usher in feelings of fear and desperation. A study by market research firm DALBAR found that while the S&P 500 yielded a 6.06% return over the 20-year period ending in 2019, the average investor saw a return of only 4.25%, with emotional decision-making being a contributing factor. Stay focused on your long-term goals and remember that investing requires patience.3

  7. The Cost of Procrastination: The earlier you start investing, the more time your money has to grow. Delaying your investment journey can severely cost you in the long run due to the impact of compound interest. This is illustrated in the following hypothetical scenario: Investor A begins depositing $25,000 annually into an account earning 6% at the age of 50 and stops at age 60. Investor B starts making the same yearly contributions at age 60. Despite both contributing the same total amount, Investor A will have accumulated nearly twice the amount as Investor B by age 70.4
  8. Delegate the Details: Investing is a complex art that involves navigating numerous variables and nuances. Delegating essential responsibilities to a financial professional who can help develop a customized strategy that makes sense for you will allow you to remain focused on your long-term financial goals.

Adhering to these principles can help you more effectively build and preserve your wealth over the long term. Remember that investing is a marathon, not a sprint; patience, discipline, and a well-thought-out strategy are your best assets in reaching your ideal financial future. If you have questions about your plan or simply seek professional advice on your investment approach, please don’t hesitate to reach out.

1Stern.NYU.edu, 2023

2S&P 500 returns include price appreciation and the reinvestment of dividends. Treasury bond returns include coupon and price appreciation. Treasury bill returns are shown at a three-month rate. Past performance is no guarantee of future results. Indexes are not available for direct investment. Historical performance does not reflect the taxes and fees associated with the management of an actual portfolio.

3TheBalance.com, November 22, 2021 (most recent data available)

4This example is for illustrative purposes only and does not represent an actual investment or combination of investments. Annual contributions are made at the beginning of the compounding period. This hypothetical example does not reflect taxes or any fees. Past performance does not guarantee future returns.

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Concord Wealth Partners, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Concord Wealth Partners. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Concord Wealth Partners is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Concord Wealth Partners’ current written disclosure Brochure discussing our advisory services and fees is available upon request or on our website. Please Note: If you are a Concord Wealth Partners client, please remember to contact Concord Wealth Partners, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, and/or revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Concord Wealth Partners shall continue to rely on the accuracy of information that you have provided. Please Note: If you are a Concord Wealth Partners client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

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