Contributed by Doug Walters
It is the season of college commencements, and across the country, celebrity speakers are imparting their vast wisdom on this year’s class of college graduates. In place of our typical Insights format, we reflect on the time-honored tradition of the commencement speech and its application to investing.
Of Risk and Failure
As I scan through the best of the 2018 speeches, a frequent theme emerges: “take risks and don’t be afraid to fail.” When I hear this, the investment manager in me cringes as I envision these young investors throwing money after risky IPOs and ventures that are, more likely than not, doomed to failure. In investing, risks should be well-understood and quantified, which (if done right) should help ensure any loss in value is temporary. This got me thinking; if Strategic’s investment team had the opportunity to send these impressionable minds off into the world with a simple investing message, what would it be? The answer is:
- Start saving early, and
- Focus on the long-term
The first point is obvious; the second is more subtle and relevant for almost anyone, not just new grads. Most investors cripple their investment returns by overtrading, market timing, jumping in late on a bubble, and exiting in fear at the bottom of a crash. A focus on the long-term helps overcome these natural emotional tendencies and capture the market benefits that patient investors enjoy.
Two of my favorite charts to help display this point are below. The first is just simply a picture of the S&P 500 from the time of the Great Depression to today. Thanks to the magic of compounding, the index has grown spectacularly.
The gains of the last decade look dramatic in the above chart, and often we are asked if stocks should be avoided as a result. The second chart puts that question in better perspective. As it turns out, the recent move is not out of the ordinary. If I let my inner MIT nerd loose on the chart, I replot it using a log axis (think of this as making investment returns linear rather than prices linear).
As I was searching through commencement speech examples, I happened across one of my graduations. Click and Clack (the NPR Car Talk hosts) were the keynote speakers (video below – can you spot me in the crowd?). Their message was unique and boils down to this: never get so lost in your work that you forget to have fun. At Strategic, we aim to give you peace of mind when it comes to your investments, leaving you more time for fun and living your ideal life.
1999 MIT Commencement – Jackie & Doug Walters
Radio Hosts Raymond & Thomas Magliozzi
1999 MIT Commencement Address
Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets over $1.3 billion.Overview
Strategic Financial Services, Inc. is a SEC-registered investment advisor. The term “registered” does not imply a certain level of skill or training. “Registered” means the company has filed the necessary documentation to maintain registration as an investment advisor with the Securities and Exchange Commission.
The information contained on this site is for informational purposes and should not be considered investment advice or a recommendation of any particular security, strategy or investment product. Every client situation is different. Strategic manages customized portfolios that seek to properly reflect the particular risk and return objectives of each individual client. The discussion of any investments is for illustrative purposes only and there is no assurance that the adviser will make any investments with the same or similar characteristics as any investments presented. The investments identified and described do not represent all of the investments purchased or sold for client accounts. Any representative investments discussed were selected based on a number of factors including recent company news or earnings release. The reader should not assume that an investment identified was or will be profitable. All investments contain risk and may lose value. There is no assurance that any investments identified will remain in client accounts at the time you receive this document.
Some of the material presented is based upon forward-looking statements, information and opinions, including descriptions of anticipated market changes and expectations of future activity. Strategic Financial Services believes that such statements, information, and opinions are based upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on such forward-looking statements, information and opinions.
No content on this website is intended to provide tax or legal advice. You are advised to seek advice on these matters from separately retained professionals.
All index returns, unless otherwise noted, are presented as price returns and have been obtained from Bloomberg. Indices are unmanaged and cannot be purchased directly by investors.