I think we don’t spend enough time and energy discussing compounding. Sure, we feel its effects when we look at our account statements from the last couple of years (especially when compared to statements from a decade ago!), but what about other areas of our lives? Is there a compounding effect that’s possible in our careers, relationships, and families that we should be more aware of?
I recently read an article that used a mathematical focus to make a larger point. The article is called ‘Hugging the X-Axis’, by David Perell, and the point was this: if we spend our lives jumping from one investment to another, from one job to another, or from one relationship to another, we miss the opportunity to benefit from the dramatic compounding effects in these endeavors that come from time. And so, we continue to ‘hug the X-axis rather than move up the Y-axis’.
A few examples of benefitting from compounding may include becoming the go-to expert in your chosen career, earned through decades of hard work and being trustworthy, or seeing your grandchildren flourish long after you chose to work on your marriage when things could have easily fallen apart, or passing on substantial family wealth to future generations and charities because you maintained a long-term investing focus. I could go on and on. The message here is this: there are wonderful benefits available to each of us and those whom we care about when we stay the course on a worthwhile path and allow time to multiply and compound our efforts.
In this issue, we take a closer look at diversification and why it’s great...and awful. We wanted to get beyond the obvious tropes about why you should diversify and get to the nitty gritty in our Back to the Basics feature. And for those of you who are considering retirement – or for those already retired who get anxious about the world and the markets – we have a very helpful exercise for you to try in our Briefcase Study. By using something we call ‘rehearsed austerity’, you may find that you’re much more able to quiet the noise around you and focus on what’s most important financially. It really can be a game-changer if you put it to use.
The world will continue to be an awesome, scary, wonderful, volatile place. We believe that focusing on the fundamentals of time-tested retirement planning will continue to be the investor’s and retiree’s greatest strategy. We wish to equip you with the very best thinking and the unrelenting support to allow you to reach your retirement goals and to live an exceptional life. Please reach out to us at any time if we can be of service to you.
Until then, we hope you enjoy the warmth and promise of spring.