After a summer of blistering heat (at least in Florida), the calendar is somehow turning to August, College Football is nearly back in action, and for kids across the country, the mixed feelings of excitement to see friends, dread for the daily grind of homework, and nervousness over what a new school year will bring, fill the air.
Thanks to the encouragement for a topical blog by our firm’s marketing director, Robin Chaddick, I have gotten the opportunity to reflect on what going “Back to School” meant for me.
Aside from digging up a few pictures of my childhood, I’ve also realized that perhaps the investing and financial planning journey we lead clients on shares more in common with the journey from kindergarten to a high school diploma than we might realize!
Learning your “ABC’s”
Just as young elementary school children learn to read and write their ABCs (I’m told not in cursive anymore, however), investors too must learn the basics. The financial ABCs involve the basic personal finance skills like spending less than you make, saving consistently, and avoiding unnecessary debt.
Don’t focus on one Class too much!
As students, we are required to take many classes ranging from Math to English to the Sciences and Art. Much the same, investors should follow the school (and even Biblical) principle of “spreading your lot among many” through diversification. Investors should consider a wide range of asset classes, from Stocks to Bonds to Real Estate, when creating their portfolios.
Growth takes time
I don’t remember a lot from Elementary School, but I do remember how the days felt… LONG! Investors, too, may feel “long days” early in their investing journey. A 10% return on a $10,000 portfolio is only $1,000 in investment returns, while on $1,000,000 it’s a $100,000 return. Just like knowledge, investing is a “compounding exercise,” with the greatest returns offered at the end of one’s journey, not the beginning. The math of the “Rule of 72” tells us that $100,000 compounded at 7.2% over 30 years will result in $800,000 before considering additional contributions, but the process will feel slow at first.
Stay in School
There will be hard days. Just as we likely can all remember a moment of bullying, a tough class, or a failed test, investing too will have hard days; perhaps those where it makes you question why you’re even “in school to begin with.” To this, I say, just as our parents told us: “Stay in school, kids!”
As kids across the country sharpen their pencils and head back to school, remember that investing is a lifelong journey. Whether you’re a student or an investor, continuous learning leads to success. Let’s have a great School Year!
August 2024
Example given is hypothetical not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.
