This is a mercifully short blog just to drive home a few points.
First, the heading
-30 + 43 = 13
is indeed a myth, it is false . . . if we’re talking about rates of return. The correct math is this;
-30 + 43 = 0 or, more precisely, -30% + 43% = 0% return for those two time periods.
Suppose last month you invested $1000 in Bitcoin and by the end of the year your share is worth $700, a 30% loss. If next year you gain 42.85% you would be back to even (700 x 1.4385 = 1000), a zero rate of return.
In frothy markets like we have currently, everyone is an investment genius. But our selective memory for achieving double digit returns doesn’t accurately project over the long term. Here are the keys to staying afloat and avoiding herd mentality:
1. Take all ego and emotion out of your investment decision making.
2. Remember your goals. Very few people come to me with a goal of making as much as possible, especially after we work through what that really means to them. Over what time period? Compare to what? Starting with what and adding how much periodically? And, most importantly, why? So you can buy a mansion in Paris that you can’t visit?
3. Stick with the plan. If you’ve done your Expense Plan, with all your dreams and goals built in to it, and our plan achieves those goals with very little risk, do you really want to let your lizard brain kick in to start running the show?
4. But be flexible. Sometimes new hazards as well as new opportunities will present themselves and we’ll have to adjust, that is, without succumbing to shiny object syndrome or FOMO (fear of missing out).
One of my favorite motivational speakers, Jim Rohn, once said that we have two choices in life, discipline or regret. It took me many years to understand and absorb that somewhat grim prescription. Words will fail, you just need to examine and initiate your own disciplined efforts. What gives your actions power is the order in which you make them.
Look at your heart, for example, and the astonishing daily discipline with which it keeps you alive. It isn’t suffering or complaining at the effort (unless you have heart disease) or wishing it could just stop and watch some TV. Its most important task is keeping you, and itself, alive and healthy.
So, what’s most important to you? Wouldn’t it be worth a discussion with someone expert in getting specific with your goals, plans and dreams?
Your Constructive Comments are Welcome!