22 Apr The Art of Investment Management
Long Term OR Short term
A good Asset Allocation Strategy will earn you from 2% to 10% over the short to medium term, the period when you don’t need the money and will leave you with let’s say 9% returns when you need the money in the long term
A pure equity strategy may perhaps earn you from -20% to +15% in the short to medium term, the period when you don’t need the money and perhaps 10% when you need the money in the long term
Clearly the difference in returns when you need the money isn’t much and for the 1% price that you may have to pay for practicing asset allocation, you get a much better Investment experience in the Short to Medium Term because of less Volatility
Volatility is like potholes on the road.
What ride would you prefer? Full of potholes or a smooth ride?????
The Short to Medium term is a period of 10 years and your quality and experience of investing plays a huge part in your decision making during those years.
A good Investment experience will encourage the client to live life without fear and enable the client to take decisions of living well without postponing essential spending.
A bad Investment experience on the other hand will make the Client delay essential expenses and thereby making him or her live a compromised life.
The early 10 years have a different meaning in life and are those years in which life has to be enjoyed.
These are the golden years of youth and liveliness. These are the years when you can extract more joy out of material things like cars, clothes, holidays, consumption etc
Hence if sentiments are not good due to Volatile Investment experience, you lose the opportunity to live an awesome life.
The same things may not give you the joy in the long term when money is abundant and sentiments are good because when you reach the age of 55 and above the material things start becoming immaterial
As an advisor the traditional belief is that our job is to protect the long term
But if you want to fill the lives of your clients with joy and abundance you need to be responsible for their Medium and also their Short term as much as you feel responsible for the long term
Only when you nurture the Client’s “Immediate” will he admit you into his life and handover the management of his future.
So clearly investment is not about a Great end result but about a long and Happy journey.
Ensure your clients Don’t Die Rich and Live Poor.