Hazards of Short-term Thinking

Short-term thinking can easily sabotage the journey of life.  Fact is, life and wealth both require clear long-term vision.  . . .

Story is told of a hot summertime when a mother realized her boys should be able to take on some heavier work around the property.  They lived on a small farm, and dad had been too busy at his daytime job to fix the fence, some distance across the field.  Pic _ leaping rabbitMom mentioned the problem to her boys and sent out to mend the fence.  Both sons arrived back in time for dinner – but their stories differed remarkably.  One son was intrigued by a wild rabbit whose footsteps meandered in every direction:  eventually the boy tired and he looked around, finding himself in another field altogether.  The other son had set off with tools in hand and instead of focusing on the hop-stop of a rabbit’s footsteps, he set his eyes firmly on the distant fence and guided his feet there.  At dinner both boys were hungry – one from chasing a rabbit, the other from mending a fence.

Short-term thinking is common in many areas of business.  A friend mentioned that she and a few others were downsized from their firm because company directors chose to cut a division to enhance share prices over the next 12 months. Pic _ Dilbert 2Perhaps Dilbert comes to mind? Well if you know such names as Warren Buffett, or Canada’s Desmarais family (Power Corporation) you may sense that successful businesses don’t focus on a given month, quarter, or even just a year.  Strategic thinking leads forward 5, 10, 30, 50 years.  This is the secret sauce to growing amid the cycles of recession and expansion …or indeed through future generations of one’s family.

VISION FOR LIFE.

Pic _ scared rabbitA gentleman recently described how he could have sold his business some years ago.  Nearing 70 now, he’s still in the office every day because he didn’t listen to his wife’s guidance about the lifestyle they wanted to enjoy in their 60s.  She’s in Florida six months of the year.  He visits her there a few days each month.  He’s frustrated that revenues have fallen.  If he were to sell the business now, it’s worth 30% compared to the value eight or ten years ago.  Even worse, serious illness or death would kill the remaining business;  competitors would buy inventory for pennies and the family would lose almost everything.  Might we say, business was this fellow’s “rabbit” …but the track led through recessions, downsizing, shrinking revenues, and growing frustration.  If ten years ago there had been a solid discussion of lifestyle and life-values they could have built very different results for their 60s to 90s … as I’ve said elsewhere, “creating life in their own image” …by their own design!

Consider your own life decisions, and how you envision your future.  Too many people (and many of your friends, perhaps) spend more time planning a major trip or vacation than the life they’ll get for retirement.  This is the point of our recent survey; heartfelt thanks to >200 who have contributed to feed into my upcoming book on retirement lifestyles.

Pic _ rabbit in canoeSomeone says they’ve rented a cottage for 2 weeks in July on a lake with all the amenities they most want to enjoy (awesome short-term plan!)  ...yet for retirement they worry about money and fail to "Vision" what may be three decades of rabbit-tracking retirement! Have they ever discussed it in any detail?  ...not even at home? ..or with close friends?  Research has proven this is actually a major contributor to stress, illness, even premature death, in retirement.

"Money isn’t everything" ..means LIFE is more important than money.  Building a PLAN AROUND LIFE is equally or more important than the money itself.  So you know why our conversations and planning are founded on life first.  Our financial results serve the life you choose.  We “vision” your future horizons or life-seasons, to keep your wealth and dreams secure even to age 95 and beyond (life income and family estate).

VISION FOR WEALTH.

Consider a senior couple today – this could be you, even your parents or grandparents.  In the 1990s they very clearly told me two guiding principles for their investments.  In two decades they’ve never changed these two principles.  First is a direct quote, “Don’t lose our money!”  Second was implied desire for growth as they asked, “how much are we making?”  They’ve never changed these two mandates.  Over the years their overall net-return has been close to 6%, with significantly less risk than wider markets.  If values were down for a season we discussed this, but safely ignored the rabbit-track because they trusted the longer term vision of owning strong assets that would increase their earnings and values along the way.

Their risk profile today is lower than it used to be.  Their investments include tangible global assets of real estate and infrastructure.   Whether valuations rise or fall in a given month or season, their income yield can inevitably increase from owning these types of assets.  Dividends have always been a central position in their portfolio.  Aligning with these key mandates we have assets and portfolio teams at far-less-risk than wider markets.

Given age and needs today, fixed-income is now a greater portion of their investment.  Here our global diversification and chosen portfolio teams also reduce risks in this asset class (see last month’s letter re-published HERE). As bond indexes and FI-ETFs dropped 3% in April, this couple’s fixed-income assets dropped near 1% and will provide solid value over the seasons ahead.

Most everything has fallen a bit in the past two months (except oil).  Pic _ Family generationsInvestors globally are wondering why investments have performed so modestly this year.  But consider how you can ignore the rabbit and keep straight toward the goal, a year, two years, 3-5 years and beyond.  With these Mandates we clear a secure path to sustainable and growing life-income …for your life and loved ones. 

Grateful to serve your Wealth for LIFE!

Brian

Brian Weatherdon, MA. CFP. CLU. CPCA. CRC. MDRT.  905-637-3500 x 223
627 Guelph Line, Burlington, Ontario. L7R 3M7.   1-877-937-3500 FREE x 223
Brian@SovereignWealth.ca 
Ret.Coach SEALAmazon: “A Lifetime Of Wealth — And How Not To Lose It.”
 
** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. For information on near 10,000 investment funds and other financial structures please feel free to contact me directly. Returns shown are from Morningstar and other major financial news media. Research is sourced from leading sources including GLC, RBC, CIBC, Franklin Templeton, Mackenzie, and a wide range of highly reputed firms. Opinions reflected in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to serve alongside your legal and accounting advisors with whom we can best protect your financial security and advance your goals. We are grateful always to receive your comments and questions.

 

1 comment

  1. May 15/15 Globe and Mail quoting Professor Eric Kirzner: “Many investors …suffer from what academics term ‘myopic loss aversion,’ a tendency to obsess over the short term and suffer high levels of distress from temporary losses. Investors focus too much on what’s happening to their portfolios right now and not enough time thinking about the structure of their portfolios…” . . . Life Income Mandates is an enduring structure to ensure vigorous yield while reducing short- and long-term risks.

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