Investor, Know Thyself!

During a business trip to New York last November I made my way to Christie’s, the famed auction house, to view Leonardo Da Vinci’s painting Salvador Mundi (Savior of the World) that was to be auctioned off a few days later. It was a fabulous painting with a history full of suspense and interesting provenance, and to the surprise of many the painting sold for $450 million dollars. This was a record sale price and an indication that the art world was alive and well. 

While the price of the painting was a record, it should not have been too much of a surprise as asset classes from art to stock to even digital currencies, such as Bitcoin, achieved record prices throughout much of 2017.  In fact, we saw the commonly referenced Dow Jones Industrial average record over 70 all-time highs!

With such returns being achieved with relative ease, it is easy for investors to lose focus on some of the key behaviors of investment success. For most investors, the following are crucial facts to keep in mind:

1. Do not make investments without considering your other assets and the impact of a new investment on the overall portfolio.
2. Make contributions to your investments part of your overall budget. The fear of losing a car or having a house foreclosed on creates a serious payment discipline. However, when this is applied to investment savings, it can become a choice and not a necessity. This is the primary reason the savings rate among Americans is low.
3. Recognize that having a financial plan is different than simply how your investments are performing. A portfolio’s main purpose is to help you remain invested even when performance is disappointing.
4. Understand the tax laws regarding your investment vehicles, and consider the tax implications when trading securities.
5. Consider the time horizon for each of your investments. Investments for short term goals should be invested differently than investments for long term goals. And as a word of caution, one of the most overlooked and least planned for goals are mid-term goals such as college expenses.

Investing is a tool to create wealth, or at least a portfolio to provide income at an appointed time. For years investing was thought only to be available to those who already had money, but the truth is investing has always been available to people who can start small. Starting an investment portfolio can be easy and automatic and should not be feared. 

The primary investment goal that people are involved in is retirement savings, typically through payroll deduction at work and Individual Retirement Accounts. Investing for retirement is a long-term process, and as with any endeavor of this nature, time plays a crucial role for success. While recommendations have been to save 10% of your income, a sobering truth is being realized that 10% may not be enough.  One of the most important tasks in retirement investing is to be a planner, and there are no shortages of financial planners, websites and retirement planning systems to help guide you in this process. Research the tax impact on your retirement investments as well, as your tax deferred savings through work or IRAs may have a stated value, but there is also a tax due. How you pay those taxes will have a major impact on the sustainability of your overall portfolio. Retirement is life’s most expensive purchase, never forget that! I recommend you be wise, seek counsel, and don’t neglect this important part of investing.

Finally, I would be remiss to not mention a note about debt. In America we have become very comfortable maintaining debt for much of our lifestyles. From houses to education, vehicles to wardrobes, we are consumers and use debt freely to fund the largest expenses to the smallest. If you do not have a debt reduction strategy now, you need to get one in place. Debt reduction should always be at the forefront of your financial plan. Another key point to remember is that there is no such loan as a retirement loan, and you must be very cognizant in preparing for your future. 

Investment success should be measured over decades. It can lead to the complete change of a family tree and financial legacy. Investment success also allows beneficial estate planning to further the Kingdom. You can use earnings to create endowments and other planned giving options to bless your family, your church, or the ministries of your choice from now until the Lord returns. 

So, do your research, seek counsel, create your plan, and stick to it! Investing could be the financial tool that changes the scope of your financial future.