As investors, we must keep our perspective on the long-term. It’s 2023, and everyone is asking for predictions. What do I think is going to happen in the market and the economy? Will there be a recovery, more sell-offs? I don’t know; no one does. The search for answers to these kinds of questions is futile.
Dozens of publications and companies make their predictions, but those predictions are, at best, educated guesses. It’s all noise. But we can’t rely on guesses to make our financial decisions, no matter how educated and respected the source. We consider the landscape we happen to be in at any given moment and make the best decisions we can.
So when people ask me what I think will happen, I answer honestly, I don’t know. I don’t know what will happen in one month or six months or one year, or five years. What I can tell you is that I’m hopeful about the future.
We will continue to see amazing innovation, to create new technology, and to grow as a society. Consider how far we’ve come in just 30 years, which sounds like a long time ago but having done the rather depressing math, it was just 1993! Think of the technology we have in our homes, the advances in medical technology that we have today that we didn’t have in 1993. And then imagine what things will look like 30 years from now, how much more new technology is just around the corner.
Our Focus is the Long-Term
We often talk about the importance of thinking long-term when it comes to investing. And the beauty of being a long-term equity investor is that predictions don’t matter, and to some extent, the future doesn’t matter.
Because we know those innovations, those new technologies that will overcome existing obstacles and make things more efficient, are happening every day. We don’t have to know exactly what will happen or when; we just have to participate in the journey.
Because when we get spooked and throw in the towel because we can’t take the stress and uncertainty anymore, we’re not participating in the journey. We’re waiting on the side of the road waiting for just the right moment to get back in. But markets often turn on a dime, and we don’t know it until it’s too late.
4 Essential Investment Principles for 2023
A crystal ball isn’t necessary, but these four essential investment principles are radically important for financial success.
1. Performance of a portfolio relative to a benchmark is largely unimportant to long-term financial success
It doesn’t matter what the benchmark does if your portfolio is set up to provide you with the income you need to pursue your dreams, your hobbies, and the legacy you want to live. If the benchmark is 40 and your portfolio is 20, but you can live the life you love, your have found long-term financial success.
Your behavior around money is more important and relevant than any benchmark. Your daily habits, how you spend, save, and invest long-term, are the things that empower you to find long-term financial success.
2. The only benchmark that matters is the one that indicates whether or not you’re on track to accomplish your dreams
This is vitally important to remember when there is all kinds of Doomsday news filling your ears and your newsfeed. The only thing that matters is your ability to pursue your dreams. If not, you need to adjust. If so, stay the course.
3. Risk is a permanent loss and should be measured by the probability you won’t reach your long-term dreams
The ups and downs of the market may not be as much of a concern depending on your investment time horizon. If you are investing for the long-term, you have time for the market to rebound from loss and exceed previous highs, as it has done historically.
4. Investing should have the objective of minimizing that risk
Our job is to help clients invest, to make wise personal finance decisions using behavioral finance. That may help minimize market risk.
I think for 2023, these 4 concepts will help you think differently about your investments and money than you have in the past and be the foundation for wise financial decisions. This year just as last year, there is a lot of noise about inflation, taxes, politics, geopolitics, and war. Some of those things impact the market a little, and some a lot. But none of them affect your long-term financial success when you follow these four pillars.
Unanswered Questions
I was talking to a prospective client who had questions. Should he sell a property and buy a new one or keep the current one and turn it into a short-term rental? How much does he need to retire? How much can he live on each year? What about Social Security?
You don’t have to have unanswered questions, and you don’t have to go through these things alone. At Paradigm Wealth Partners, we answer these kinds of questions every day, all day. Our purpose and mission is to help people make intentional financial decisions so they can pursue their dreams and live their core values.
If you have questions about working out, you might hire a trainer. If you want to improve your diet, you might hire a nutritionist. You can research these things on your own, of course, but the information out there is not always correct, and it’s certainly not tailored to your specific needs.
That’s what advisors are for. We help clients make educated financial decisions, so they feel confident they’re doing the right thing. If I do X, how will it impact my overall plan? We answer this question every day. It goes far beyond investing questions; it includes daily decisions, behavioral decisions, how you save, and how you teach your kids about money; all of those things impact your financial situation, and they are questions that deserve to be answered.
When it comes to retirement planning, think of two possible doors. Behind Door #1, we run out of money before we run out of years. Behind Door #2, we leave plenty of money behind for our families and our charities. There are only two outcomes in retirement planning, not having enough money and having enough money. Our job is to usher you through Door #2.
If you have questions on Social Security, pensions, RMDs, QCDs, rentals, life insurance, whether you should lease or buy a car, if you should refinance your mortgage, reach out; we’re here to help.
There are a lot of changes in 2023, including changes to Social Security and changes ushered in by the SECURE Act 2.0. Katie is working behind the scenes on some content around those issues.
We’re here to be your ally and to walk the journey with you. Thank you for your trust and confidence.
And check out my new YouTube channels. The videos are short, walk and talks, where I take a stroll and talk about whatever’s on my mind. And I have a Paradigm Wealth Partners channel too.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Investing includes risks, including fluctuating prices and loss of principal.
Listen to the Full Episode:
What You’ll Learn In Today’s Episode:
- Why most predictions are merely noise.
- What you can do to make the best decisions.
- Looking at the big picture and using that to set your expectations.
- Four investment principles you need to understand.
- What people are actually looking for in advisors and why it’s so hard to find.
- Why it’s so important to tell your financial advisor what you’re going through.
Ideas Worth Sharing:
- “To be frank, I don’t know what’s going to happen—and no one does. The search for the answer to this question is futile.’” – Jonathan Bednar
- “We can’t rely on all of those predictions and guesses to make financial decisions.” – Jonathan Bednar
- “The beauty of being a long-term equity investor is that our future is in the long-term, where innovation and new ideas are born and companies continue to innovate and find new solutions to existing obstacles.” – Jonathan Bednar
Resources In Today’s Episode:
- What The Wealth?! by Jonathan Bednar
Enjoy the show? Use the Links Below to Subscribe: