Finally, stock market volatility diminishes substantially over time, with a 75% decrease in variability for 10 years versus one year. As a result, developing patience and a long-term perspective are key to building wealth. We are living longer and need to invest appropriately. Even at age 70, the investment time horizon is more than 20 years.
INVESTMENT TIME HORIZON BASED ON AGE AND LIFE EXPECTANCY
Source: SSA, Life Expectancy Calculator (https://www.ssa.gov/planners/lifeexpectancy.html)
The table shows the number of years until retirement and the number of years past retirement for different ages, based on life expectancy and retirement at age 67. Successfully funding a long life into retirement requires consistent action, which includes making regular contributions while working and staying fully invested. Even in retirement, it remains important to stay adequately invested in growth-oriented investments. The focus on short-term investment performance and the associated micro-management of portfolios is counter-productive to building long-term wealth.
Investing is a long-term exercise that requires patience and stamina. Unfortunately, we are hardwired to react to our emotions in the present at the expense of our future selves. With planning, separating out short-term cash needs from long-term investments can help to avoid emotional short-term bias. Like becoming a marathon runner, becoming a long-term investor takes time, effort and discipline. The challenge is not to find better investments, but to become a better investor.
From the Behavioral Viewpoint
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IMPORTANT INFORMATION AND DISCLOSURES
The information provided here is for general informational purposes only and should not be considered an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. It should not be assumed that recommendations of AthenaInvest made herein or in the future will be profitable or will equal the past performance records of any AthenaInvest investment strategy or product. There can be no assurance that future recommendations will achieve comparable results. The author’s opinions may change, without notice, in reaction to shifting economic, market, business, and other conditions. AthenaInvest disclaims any responsibility to update such views. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any AthenaInvest representative.
You are solely responsible for determining whether any investment, investment strategy, security, or related transaction is appropriate for you based on your personal investment objectives and financial circumstances. You should consult with a qualified financial adviser, legal or tax professional regarding your specific situation. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance.