What you focus on magnifies
Concentration and focus can be a good thing or a bad thing depending on what you choose to focus on. It’s why diets can be helpful, at least as long as you focus on what you’re eating and on how much you exercise. It’s why budgets work because you focus on where your money is going. It can also help you live a happier life by focusing on the positive things that surround you every day instead of the negative, or limit your joy by keeping you bound to your fears and challenges.
We’re in one of those periods financially where choosing what to focus on can make or break your ability to succeed as an investor. The constant chatter about the latest covid variant, political and societal unrest, supply chain woes, inflation, and a host of other negative themes scream for our attention, and focusing on those things can really leave us felling anxious and concerned.
It is the same with your investments. We all know the markets go up and down over time, but when they go down, it feels like they will never stop. For example, we had a nice run from the summer into mid-November and then most of the positions we hold began a slow and steady decline into year-end. January is also off to a slow start, but despite the declines we’ve seen lately, most people are still roughly where they were 6 months ago. Last summer I don’t know of too many folks who were feeling concerned about their financial situation, but today the anxiety levels seem to be higher – even though financially speaking they are in the exact same place.
This is a common phenomenon and one that causes the average person to make critical financial mistakes when managing their investment portfolio. The markets do fluctuate and some seasons are better than others, but our natural tendency is to think that a move higher or lower will continue in that direction – sometimes indefinitely, even though logically we know that can’t be the case. And yet, here we are today, down significantly from where we peaked a couple of months ago. Focusing on that period alone will scare you to death. It is difficult for me to endure too!
However, think back to how you felt last summer and see if the concerns you may have today are as concerning. For most people, I’ve found that by focusing on a longer time horizon, like a year or two, compared to a few months or quarters, you can keep a more realistic perspective about where you are financially and where you’re headed. Realistically, we should all keep our eyes on the longer-term horizon and not be distracted by the short-term wins and losses the markets give us along the way. Even if you’re older, you still likely have a “longer term” time horizon of 5-7+ years to consider.
So, look at the following thoughts about the future and see if you agree with any of them:
Electric vehicles will continue to grow in popularity over the next decade
5G communication networks will be launched transforming our ability to communicate and function digitally
Inflation will likely remain with us for the foreseeable future causing the U.S. government to use its powers, like raising interest rates and printing money, to manage the growth of the economy
The need for cyber security will rise as companies and governments strive to protect their data and people continue to work remotely and make online purchases
People will prioritize being healthy and looking good as the masks come off in person and on video calls
Artificial Intelligence will become better and more prevalent, enhancing many everyday experiences we have now.
Technology will continue to develop and improve at increasing speeds in the future and thereby have even more influence in our lives
People will desire to travel again once the world opens up after the pandemic ends
These are just a few of the things I am following and using as the basis for investment decisions. If you believe that even a few of the statements above are true, we are in the right place financially to benefit from them the way things are positioned now. And, each of these themes have a long secular growth cycle ahead of it, so staying focused on those longer trends give us a better perspective as investors and owners of some of the finest, most profitable companies in the world.
Henry Wadsworth Longfellow said, “Into each life some rain must fall, some days must be dark and dreary.” Just remember that when it is raining on your investment portfolio, it is often preparing the way for the next growth cycle. Sunshine always follows the rain and storms come to pass, not to stay.
By focusing on the right things even when it feels like things are going wrong, you can come out on the other side with more confidence, certainty, and peace of mind. Your financial portfolio will likely reward you for your patience and persistence too. It’s very difficult to time the ups and downs correctly and consistently. People who try are not investors. They are speculators, and that’s not what we’re doing with your hard earned money.
People ask if the glass is half full or half empty, but in reality the answer is that the glass is refillable. It doesn’t matter if it is half full or half empty. Drink it down or fill it up, whichever one suits your needs – and always keep your long-term best interest in mind when the markets try to steal your attention to short-term matters that usually don’t matter much over time. There will always be something to worry about or to get excited about. Opportunities, like the glass, are refillable and we want to be ready for them when they come.