Anytime there is a plane crash anywhere in the country, I get calls from people (usually my mom) checking to see if I am ok. I often remind people that the fact plane crashes make such big news is evidence of their rarity. As an example, our Saint George airport reports 54,000 flights per year, yet in the past 20 years we have had only four fatal airplane accidents, all of which were attributed to pilot error.
When it comes to the stock market, much as with flying, the dramatic events always make the headlines. The sharp rises and falls capture the attention of reporters who love drama. In the process we often overlook the slow but continual plodding forward of our economy and the benefits it can bring to investors over their lifetimes.
When people come to me seeking investment advice I often hear comments such as, “We got hammered in the crash,” or “the markets haven’t made us any money in years.” When, like a NTSB accident investigator, I look into the cause of their past problems, I often find much of it related to pilot, or investor, error.
It’s easy to blame the markets when we don’t do well. But just as most flights end safely, most long-term investors who do their homework and follow some basic rules, generally turn out just fine. From my experience, the problem is rarely the market. I have found that success in investing for retirement is almost always based on things the investor can control.
Let’s start with a 2015 report by Deutsche Bank that found 47% of American households save NOTHING. That is shameful. No matter how little you make you can always set something aside for the future. Nearly half of American families are failing to prepare for retirement and they cannot blame markets for that.
Whether it be selling and buying on emotion, failing to set aside resources for the future, being too heavily concentrated, chasing last year’s returns, going to cash in a moment of panic, following the crowd, being unwilling to admit your mistakes, buying without proper research, dabbling in risks you do not understand, not accounting for inflation or any other number of mistakes, investors continue to be their own worst enemy.
I believe that saving enough for retirement is quite doable for the large percentage of Americans. Like flying an airplane, if done with proper preparation and skill, the outcome is usually successful. Yet like some pilots, investors continue to suffer setbacks largely because of their own mistakes. Evidence of this is the annual Dalbar* report which continues to show that investors as a whole vastly underperform the very markets in which they invest.
Life is full of tragic events, many of which are avoidable. If you are unprepared for retirement, or if your investments have struggled for years, do not blame the markets. Look in the mirror and realize that your success or failure is largely dependent on things that lie well within your own control.
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, 1173 S. 250 W. Suite 505, St. George, UT 84770.
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