Thinking Long-Term
The concept of long-term commitment is easier to think about than to accomplish. The world we live in today provides no shortage of instant information at our fingertips, leaving us with little need for the mental exercise of PATIENCE. Most people agree that a long-term strategy is the right choice in terms of investing, careers, or relationships. The addition of time has a strong correlation to better long-term results. But how can we train our brains to actually do the long-term actions that we know are the right things to do?
MINDSET is everything
The long run is just a collection of short-term hurdles to navigate. Simply saying you have a ten-year time horizon doesn’t exempt you from all the nonsense that happens during the next ten years. Everyone has to experience the recessions, the bear markets, the meltdowns, and the other surprises, often at the same time. So, rather than assuming long-term thinkers don’t have to deal with nonsense, the question becomes, How can YOU endure a never-ending parade of nonsense?
Your BELIEF in the Long Run
Isn’t Enough It’s not just you—your investors, coworkers, and spouses also have to sign up for the ride. A portfolio manager who loses 30% can tell his investors, “It’s OK, we’re in this for the long run,” and believe it. But those investors may not believe it. They might move their money to another firm, and even if it turns out that manager was right, it doesn’t matter—because no one’s around to benefit. The same concepts can be applied to the other parties mentioned above. Everyone needs to believe in the long run, or the endeavor will not survive.
PATIENCE is a Requirement
The pace of change in the current day and age would have been inconceivable just a decade ago. The potential for information overload can feel exhausting at times. Nearly everything is accessible via the phones in our pockets, and same-day delivery on our packages is becoming the norm. Waiting has very nearly become obsolete, which makes the long-term mindset that much more difficult to achieve.
Maintain DISCIPLINE
It’s hard to know how you’ll react to decline. If I say, “How would you feel if stocks fall 30%?” you would probably picture a world where everything is the same as it is today, except that stock prices are 30% lower. In that world it might be easy to think, “That would be fine, I’d even see it as an opportunity.” But the reason stocks fall 30% might be because there’s a terrorist attack, or the banking system is about to collapse, or there’s a pandemic that threatens to kill your whole family. In that context, you might feel different. You might switch from a mindset of opportunity to one of survival. And you might not have the endurance you once imagined.
Long Term is Less About Time Horizon and More About FLEXIBILITY
If it’s 2010 and you say, “I have a ten-year time horizon,” then your target date is 2020—which turned out to be the year the world fell to pieces. If you had a business or were an investor, it was a terrible time to assume the world was ready to hand you the reward you had been patiently awaiting. But being patient and disciplined throughout the past decade has given you the flexibility on how to proceed moving forward. If your mindset or actions go off-kilter in the earlier years, that could mean more limited options for your financial future. Time is compounding’s magic, and its importance can’t be minimized. But the odds of success are most in your favor when you combine a long time horizon with a flexible end. The tug of war between your short-term and long-term mindset will be challenging at times, but if you need reassurance that you are doing the right thing, we are here for you. A longer time horizon increases the possibility that you’ll experience more speed bumps or disasters, but how you deal with them will help determine your future.
— Brant Jones, CFP®