INDUSTRY INSIGHT
YOUR FINANCES
SPONSORED CONTENT
TIME IS
ON YOUR
SIDE
I
n 1964, the Rolling Stones sang, “Time is on my side, yes it is
.....” And the song continued with, “You’ll come runnin’ back
to me .....”
When it comes to investing, time is on your side. The
longer you remain invested, the greater your chances for success.
The worst 10-year return for the S&P 500 (all stocks) ended
in 1938. The average annual return for that 10-year period was
-1.7%. The second worst 10-year return for the S&P 500 ended in
2008. The average annual return was -1.4%.
Investing your money into a single stock can result in a capital
loss if that company should fail. Ask anyone who owned shares
in Enron or WorldCom a few years ago. Of course, the rewards
can be great, particularly if you take a buy-and-hold strategy
over a long period of time. Imagine if you had bought Amazon
in 1997—a $2,000 investment then would be worth almost $1
million today.
Back in the 1940s and 1950s, the small percentage of
Americans who had the wherewithal to invest bought individual
stocks and accepted the risk and reward associated with those
securities. They could also purchase individual bonds, but it was
more difficult to diversify back then.
In the 1960s and 1970s, mutual funds along with 401(k)
pension and profit-sharing plans began to emerge as popular
investment vehicles. The mutual fund concept opened up
investment opportunities for the masses and provided a great
way to diversify one’s assets since a mutual fund typically
contained hundreds of stocks and/or bonds.
Today, a great majority of Americans consider themselves
to be investors even if they are putting only a small amount
of money into their 401(k) plan at work. The risk of losing
money has been greatly reduced with mutual funds and broad
diversification.
If you go all the way back to 1937, the worst 10-year period for
a diversified portfolio consisting of 50% in equities and 50% in
fixed income was just over 2% per year according to Ben Carlson,
CFA. This is amazing when you consider the crash during the
Great Depression, which saw stocks drop nearly 90% from top
to bottom. Even with those enormous losses and one of the
worst US economic contractions in history, a diversified portfolio
still gave investors positive returns over a decade. Of course, an
investor had to resist the temptation to sell at the bottom.
The key to successful investing today then is proper
diversification, time, and patience. It may take quite a while
to build a significant nest egg, but once you do, it may grow
exponentially.
We know the market will fluctuate up and down, but if you
don’t sell when the market is down, you won’t lose. There are
no guarantees, but if history is any indication the market will
recover and come back.
Warren Buffett once said, “The stock market is designed to
transfer money from the active to the patient.” Here is a case in
point: In 2008, if you were active and sold US stocks when the
market was down over 50%, you probably lost. But if you were
patient and stayed the course, US stocks rallied, and now the
market is up about 275%.
You might be older and think you do not have time on your
side. But with expanded lifespans due to medical technology
and healthier lifestyles, people are living longer and longer. Kirk
Douglas is 102. As C.S. Lewis wrote years ago, “You are never too
old to set another goal or to dream a new dream.”
The longer your time horizon, the lower your risk, and the
greater possibility of success. You should always invest wisely
based on your personal financial goals, diversify your assets, and
most importantly, be patient. If an investment sounds too good
to be true, it’s probably not a good choice. The road to financial
failure is cluttered with get-rich-quick schemes.
The Rolling Stones are still performing today—53 years after
first recording the song, “Time is On My Side.” Time has certainly
been on the side of the Rolling Stones. And time will be on your
side if you think long term when it comes to your investments.
This Industry Insight was written by Garrett S. Hoge.
Garrett S. Hoge, CFP®, ChFC®, MS of H Financial
Management, is a private wealth manager based
in Southpointe serving the ever-changing financial
needs of his clients. Please contact Garrett at H
Financial Management, 400 Southpointe Blvd.,
#420, Canonsburg, PA 15317, Phone: 724.745.9406,
Email: [email protected], or via the Web: www.
hfinancialmanagement.com.
Securities offered through Triad Advisors, LLC, Member
FINRA/SIPC • Advisory Services offered through H
Financial Management.
H Financial Management is not affiliated with Triad
Advisors, LLC.
PETERS TOWNSHIP
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F EB R UA RY / M A R C H 2019
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