As we step into the holiday season, it’s always interesting (or perhaps painful) to recall those New Year’s resolutions – particularly about diet and exercise. I read somewhere that health clubs pick up more than 50% of their new members in January. Business for weight loss programs and products is also robust – the proliferation of Jenny Craig and Weight Watcher commercials will astound you at the turn of the New Year. Sadly, most of those new health club members visit less than five times in a month, and never return. Many who join weight loss programs don’t commit long enough to get those “Jennifer Hudson” results.
Discipline is Essential to Success
Like most successful endeavors, diet and exercise require a certain amount of discipline. Investing is no different. As I often say, investing is not an event – but rather a dynamic ongoing process. Yet, most people define investing success with a beginning date “when I got in”, and an end date, “when I got out”. By using the boundaries of this definition, people box themselves into perceived optimal times to invest, thus setting up obstacles:
- “Can’t invest if the government doesn’t raise the debt ceiling.”
- “Can’t invest during the sequester.”
- “Not a good time to invest during the euro crisis.”
- “Markets are too high!”
- “Rates are too low!”
And on it goes . . .
In addition, those who are invested can also go ‘off the wagon’ during what they perceive to be suboptimal times. Successful investing requires the commitment to trade current capital today for the promise of return potential in the future. Like dieting and exercise, investing has to become an established part of one’s routine.
A Regular Investment Plan Can Help
Constant exposure to the markets, across an array of asset classes, may help smooth out the effects of volatility and help investors take advantage of opportunities caused by market retreats. Then, when capital is needed down the road, portions of that portfolio can be parsed appropriately.
For example, there is much debate about whether bonds are worth owning at this point in the rate cycle. I believe they can still occupy a useful spot in a diverse portfolio. Think about a closet full of shoes. Mine contains sneakers for workouts, dress shoes for work, casual shoes for every day – and galoshes. I rarely wear galoshes, and I’ve heard some folks say they’re out of style. But when the weather here in New England gets nasty, I’m glad I have them in my closet. I believe that when the time comes in the market’s cycle, I’ll be glad to have those bonds in my portfolio as well.
But enough of my mixed metaphors. Whether you make a resolution in 2014 to diet, exercise or become a better investor, the first step is simply to start. The second is to develop an ongoing discipline – routine and process – that allows you to stay the course and prepare for the inevitable obstacles. We at Pioneer Investments will be talking about “navigating change” in 2014, to help investors better prepare and execute a plan to pursue their goals. Investing, like life, is not drawn in a straight line from beginning to end. Both require a movement forward each day, and full engagement to get the most out of the experience.