In 2015, I ran the San Diego Rock ‘n’ Roll Marathon. I turned 50, and my goal was to finish the marathon in 3 hours and 15 minutes. I was on pace for the first 23 miles, but the next few miles required a significant hill climb to the finish line. It was soul-crushing, and I did not hit my target, but I ran a personal best time of 3 hours and 21 minutes – not bad for an old guy! If I did not set the ultimate goal of finishing the marathon, I would’ve quit before the hill climb. However, I kept my feet moving and crossed the finish line in record time.
In 2007, I recommended balanced, diversified investment portfolios to clients. The models consisted of large, small, and international stocks and included cash, bonds, and real estate holdings. The models were globally diversified, similar to our investment models today. The models performed well until the Great Recession when the S&P 500 dropped more than 50%, a sixty percent stock and forty percent bond portfolio fell by 41%. A few clients panicked and sold in 2008 and 2009. They took their eyes off their goal and did not finish the race. If they remained invested, they could have doubled their money.
The sixty model doubled in price from January 1, 2007, to September 30, 2022, despite the crash in 2008, a double-digit loss during the fourth quarter of 2018, the COVID correction, and the recent sell-off. Investors who sold and bought a short-term bond fund like the iShares 1- 3 Year Treasury Bond Fund (SHY) earned 1.73% during that same period. The “safe” option turned out to be a poor choice.
Successful investing requires goals, patience, endurance, courage, and wisdom. If you don’t have a plan, you will likely abandon your investments when times get challenging. A plan can keep you focused and grounded on your financial goals, allowing you to benefit from the long-term growth of stocks.
Obstacles are those frightful things you see when you take your eyes off your goal. ~ Henry Ford
October 3, 2022
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. My previous PR occurred at the Boston Marathon in 2011, where I finished the race in 3:22.