I heard a young man, age 15, give a speech wherein he commented that he was not yet born when the twin towers were attacked in 2001. With the memory of that day so real to me, it was odd to think there are Americans, about 30% of us now, who were either not born or too young at the time to have any memory of that terrible event. I pursued this thought and calculated that about 55% of Americans have no recollection of the Vietnam war. More significantly, the percentage of Americans who can remember World War 2 is in the single digits.
As a teenager, my dad told me that sometimes there is no substitute for the education that comes with age. He said that age “brings perspective.” As I considered this young man who was speaking I thought a lot about perspective. As time builds distance between us and some of the terrible human caused disasters of the past, we slowly lose some of our perspective.
Perspective is equally valuable in investing. Nearly ten years ago on October 9, 2007, the Dow Jones average hit an all-time high just above 14,000, and then two days later began its collapse to near 6500 just 17 months later. At the time there was panic, frustration and uncertainty. Now, with that same Dow again in record territory having surpassed 22,000, we have a little better perspective. The fear of those days has been swallowed up in nearly 8 full years of market growth.
At a recent financial advisor conference, the presenter asked for a show of hands of all those who had been in the business less than 8 years. Remarkably, a large percentage raised their hands. I suddenly realized that a large number of current financial advisors have never seen what a down market looks like. They have studied it, but have never felt it, or looked a client in the eye who was suffering under it. My own kids who work with me have not, and so I spend a great deal of time trying to help them gain some perspective.
If you are just getting started in investing, I suggest spending some time visiting with someone much older than you are. Ask about inflation and the high interest rates of the early 80’s, or the bond market crash of the 90’s. Get them talking about how great everyone felt in the late 90’s when the markets could do no wrong, and then ask what it was like in 2000 when it all came crashing down. The equity markets have generated great wealth over the years, but like all investments they have their risks. A good way to assist in managing for that risk is to spend some time talking with someone old enough to have lived through a few financial disasters. They may not know all the technical textbook terms, but they can certainly provide perspective and in my experience, that is often much better.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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