A week ago, I was in Honolulu with other members of the Hawaii chapter of the Amazing Care Network. We were fortunate to have Lauriann Delay of Morgan Stanley with us to discuss the financial markets, how our investing mindset changes as we age and strategies that will help us to NOT outlive our assets.
I was struck by a research finding Lauriann cited: Since we rarely know our own longevity, we balance financial decision-making against two unknowns: our life expectancy and future market returns. She noted that in a recent market survey, 70% of respondents fear out-living their assets while only 30% fear dying.
I don’t know about you, but I tend to have a weird, schizophrenic response to my investment portfolio. There are times when I’m aggressively reviewing our stock and bond performance, and trying to figure out how I can beat the benchmark index. There are also times when I’m too busy to pay attention to how our portfolio is performing. And like the example Lauriann cited in her presentation, I tend to make unwise decisions, like buying high when everyone else is buying and selling low when my friends are panicking.
Among the nuggets of wisdom I learned from Lauriann’s talk is to think about my investments the way one would think of a real estate investment, say in an apartment building. Assuming I did my homework before buying the building to make sure it’s what I want (good location, good tenants, structurally sound building), then I shouldn’t panic and check on the building everyday if the economic news is bad. Indeed, one of the best charts in her presentation showed how an investment asset class can be a star performer one year and come in dead last in terms of returns a few years later. I learned that a diversified portfolio, which will never deliver stellar returns but will never give me huge losses either, may be the best bet given my risk tolerance. You may have a different risk tolerance than me, so you would naturally make different investment choices than me.
Like many things I’ve learned about building a business, successful investing requires patience and discipline. I am grateful to Lauriann for sharing her wisdom and experience with us.