By: Jeff Bullock
Google the phrase, “quotes on time” and you’ll find everything from funny memes to great philosophy. Time is scarce, relative, puts life in perspective, and is the great equalizer. Most of us wish we had more of it.
The orange and black monarch butterfly has a different concept of time than we do. These beautiful creatures live a full but very short life. In a given twelve month period, a monarch flock can cycle through 3-5 generations. The lifespan of the first few generations born in the summer live only 4-6 weeks. The last generation, born late into the fall, lives much longer, 6-9 months, as they are tasked with migrating to warmer climates and surviving the winter. Year after year, the same process and lifespan continues for these creatures. Their perspective on what constitutes a “long time” is quite different from ours.
Investing money is no different. Time is your friend when it comes to investing. If you believe in innovation, growth, and human ingenuity, then time can perform wonders on a growing investment portfolio. Below are a few principles I use as guidelines for investing related to time:
- What is your definition of ‘long term’?: When it comes to public markets investing, having a long investment time horizon is important. Here is how I generally break it down:
- Short Time Frame: 0-3 years
- Medium Time Frame: 3-7 years
- Long Time Frame: 7+ years
- How does your time frame affect investment decisions?
- Time frame is one of the most important inputs when building an investment portfolio. Money you need in 12 months will be invested very differently than money you need in 5 years.
- When do you need cash for that big purchase?
- Your cash needs will drive a key part of the investment decision-making. This is an ongoing process. Even after an investment portfolio is implemented, we always want to be aware of future cash needs that may require shifts in the portfolio due to the timing of these needs. Communication is key.
If a flock of monarch butterflies asked me to invest their retirement money, my advice would be much different than someone who is decades away from retirement. Keeping a long-term perspective for your money is key, especially during off years like we’re experiencing now.
Despite inevitable volatility that exists in markets, history has shown that investing for the long run has proven to be a worthwhile endeavor for wealth creation.
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