Common Sense Investing – Looking Up – Rule 2 – Time Horizon
Thursday, July 8th, 2010You may remember the single day two months ago when the Dow Jones Average fell nearly 1,000 points, only to gain most it back by the time the market closed. It has become known as the “Flash Crash” because it all happened so quickly. There were some panicked people on that day, and the radio talk show guys were playing it up like the world was coming to an end. A few days after the event I ran into a friend on the street who said, “So were you worried when that was happening?” I responded that I would have been worried if I, like the guys on the radio, only had a one day time horizon. He thought for a moment then laughed.
For most married couples today it is expected that at least one of them will live into their nineties. Therefore we must think of retirement as being 30 years without a paycheck. Though the stock and the real estate markets can be volatile in the short term, they have historically provided strong growth over the long run. If we allow the “Flash Crashes” to scare us away from these long-term markets, then we are left with the possibility that our money may not last as long as we do.
Before I tell you why I believe that now is a great time to invest, I want to establish my second ground rule. Understand the time horizon for your money. Some of it you will need to spend today, some next week, some in 10 or 20 years or later. As I speak of investing in the stock and real estate markets of today, I am speaking about that portion of your money that you will not be needing for the next five years. We will be looking at opportunities to buy things for significantly less today than what I believe they will be selling for five years from now. Then when a “Flash Crash” occurs we can ignore it. Likewise, if the market soars on a single day we will ignore that as well.
There is a place for some low risk, and low return investments. They protect money that we will need in the near term. There is also a place for investing in the future of America, which future I believe to be very bright. Now we are ready to discuss what I believe that future will be… (continued next week)
Dan Wyson, CFP® is author of the book “21 Financial Myths” and owner of Wyson Financial. 1173 S. 250 W #305 St. George 435-986-9525 - Securities offered through LPL Financial FINRA/SIPC








