END OF SCHOOL YEAR AND YOUR MONEY
As originally appeared in The Jerusalem Post on June 29, 2018.
Remember, half the doctors in this country graduated in the bottom half of their class.
-Al McGuire
Lucky for me that for the first time in about 14 years I had no school graduations to attend. While everywhere you turn on social media you see pictures of various friends’ children graduating from various educational facilities, this year, nothing for me. And my back is the better for it! Especially in Israel where we have the Misibat Siyum, the 2 hour long end of year pageant for kindergarten, where we need to sit on chairs made for 4 and 5-year-olds, watch as our kids perform dances and songs, and then listen to rhymed speeches given by parents as they present gifts to teachers, I can’t say that I am broken up by the fact that I was spared this year.
That being said next year will be big for us as we have our first child who will finish high school, which is a rather significant milestone and an even bigger reminder that we are getting old.
Finance
What is the connection you are wondering between school graduation ceremonies and your finances? It’s the need to forget about the here and now and start to focus on the bigger picture and the long-term. Another sign of the end of school is the last day when the kids bring home report cards. Just like when raising kids we may get frustrated in the short-term, and not overjoyed when a child brings home a 65 in art, but if we take a slightly longer view we realize that whether or not the child gets the 65 or knows the dance moves at the Mesibat Siyum, it’s pretty irrelevant to adulthood. I actually write this as a reminder to myself not to get too angry with my kids that a bad score on a test isn’t the be all and end all and that even a child with mediocre grades can succeed in life!
It’s the same with your money and investments. Don’t get caught up in short-term market volatility and start panicking if the market drops 5-6%. That may be easier said than done in a society that places such value on answering the question every single day of why the market rose or dropped. I know that 24-hour-a-day business channels need to fill their airtime but over-analysis of market movements does most investors no good. I may sound like a broken record but markets have corrections frequently and it’s the investor that doesn’t get all nervous and panic that makes money and builds wealth over time.
I preach to my clients that it’s a sucker’s game to try and time the markets. I will repeat a quote I’ve used in the past from Mark Hulbert. “If you think you will know it when this bull market finally comes to an end, you are kidding yourself. The vast majority of professional advisers who try to get in and out of the stock market at the right time end up doing worse than those who simply buy and hold through bull and bear markets alike. Even those few who beat a buy-and-hold strategy during one period rarely beat it in the next one.”
The data is conclusive that professional investors are lousy at timing the market and then the question is why on earth do individual investors think they can do better? As I wrote about last week in regards to the Trump threat of a global trade war, I have received calls from clients worried about a stock market crash. My response to them is that 1- markets rarely crash and I wouldn’t be too worried about it and 2- if they are worried about it, it means that have an incorrect asset-allocation. It means that they have too much exposure to the stock market. If you can’t afford short-term losses in your stock portfolio, you need a more conservative approach.
The most important aspect of managing your finances is to make sure that your portfolio is in line with your short and long-term goals and needs. Then make sure the money is properly allocated so you can accomplish your financial goals.
Mazel tov to all the graduates!
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.gpsinvestor.com or email aaron@lighthousecapital.co.il.
