Your Investments: Long-term investing really works

Slow and steady wins the game, and I can’t stress enough the importance of keeping it simple.

By AARON KATSMAN
February 14, 2018 22:41
3 minute read.
money

money. (photo credit: REUTERS)

 
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“The kind of investors we seek are long term, because that’s how we make our decisions.” – Tim Cook

About 16 years ago, while working at Citibank in Tel Aviv, I was asked by a colleague who was also a financial adviser whether I actually believe in investing in financial markets. He told me he tells his friends and family to put their money in bank deposits!

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“Do you really believe in stock investing?” he asked. I replied that I really do, and that it would be a bad situation – to put it mildly – if I didn’t believe in it if I was actively speaking to clients about the power of investing.

Skepticism

Fast forward to a month ago, and I was sitting with a single lady in her early 40s who has no debt, a job that pays just enough to keep her head above water, $250,000 in retirement funds and a regular investment account. She was panicked that she won’t have enough money to retire. I kept telling her that she is in great financial shape, and compared to most individuals her age, she is way ahead of the game.

She was not buying it. I then ran some numbers on a very basic compound-interest calculator (I actually encourage all of you to do this exercise as well). We took her $250,000 and inputted some very basic data, such as a 20-year investment time horizon, no expected deposits and a 6% return. In 20 years with those parameters she will have accumulated more than $800,000! Obviously there are no guarantees, and past performance is no indication of future returns.

While this calmed her to a certain extent, I still think she was a bit skeptical. Since I met with her, I have had two more phone calls that help prove investing for the long-term really does work.



Real-life examples

A longtime client of mine called to tell me he is withdrawing most of his money to buy some real estate with his son. We were reminiscing about how his account had performed over the years. It turned out that he had started with me in 2003 with about $350,000; since then, his account grew to $880,000. It’s also important to mention that he was not at all aggressively invested.

Earlier this week I got a call from a lady who told me that unfortunately she is getting divorced. They also started with me back in about 2002 with $90,000 and added about $10,000 a year or two later. Their account grew to more than $240,000. Again, I would point out that they were not aggressively invested.

What both clients had in common was that they had a long-term vision, set some goals and invested in basic – what I like to call chocolate/vanilla – types of investments. They kept it simple.

The point of this is not as a way for me to show off and brag that I am Hashem’s gift to investing. I am far from that. Rather, the point is that if you have patience, stick with your plan, invest in quality investments, keep it simple and have a long-term investment horizon, good things can and usually will happen.

Just do it

There is no reason for you not to have the same success. If you want to have a secure financial future, you need to invest for the long term, and you shouldn’t put off starting to invest. Sit down and map out your goals and needs.

Then speak with a financial adviser to create an investment plan that will help you achieve those goals.

With baseball season just around the corner, I advise you not to try and hit grand slams with your investments; rather, shoot for lots of singles.

Slow and steady wins the game, and I can’t stress enough the importance of keeping it simple. I see too many people fail to grow their money because they get involved in too many complex investments, and those tend to not pan out.

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.

aaron@lighthousecapital.co.il

Aaron Katsman is a licensed financial professional in Israel and the United States who helps people with US investment accounts. He is the author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing.

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