“I think the best way to invest is with a long view,” said
As the
“The thing that is unique about finance is that everyone has something in their life that is more important than money,”
Shellenberger said that the further out an investor looks, from three to five years to 10 years, the more likely that person will make money. Because of that, there may be opportunity in times of contraction, although the risk is higher, so finding the strategy that is the best fit may be best left to professionals.
“You’re hiring us to do investment management for you. However, one of our biggest jobs is the psychology of it,” he said. “We help people determine the right risk level going into (investing), and we want to make sure that whether things are going up or down, they are at that level (that fits).”
A young family may have a 10-year plan that includes buying a house, for example. An older investor may dream of a retirement filled with travel, while retirement might mean as much time as possible with grandkids to other investors.
No matter the end goal, the most successful investors focus on their purpose in life and what really drives them, rather than short-term returns, Sloat said.
In the short term, investment markets can be tricky. The greater the time invested in high quality, well-diversified investments, the higher the likelihood of success.
The key to successful investing is to focus on what investors can control, he explained.
“You can’t necessarily control what markets do, and you can’t control what inflation does, but we can control how much we save. We can control where we invest the money, and we can control when we buy and sell,” Sloat said. “We want to focus on what we can control according to what our plan is.”
Together,
“Very few investors are in it for the short term, so if you can, begin to invest young or whenever you can,” he said.
Longterm, the economic cycle consists of periods of expansion and contraction, and after a period of several years to a decade of expansion, it is natural that a contraction will follow.
“Strictly looking at numbers, as we do, we are in contraction right now. No doubt about it,” Ebzery said. “We have viewed much of this year as an opportunity to reduce risk in portfolios.”
Herbst said that for older investors, contraction can be frightening.
“We’re not making rash moves,” Herbst said, adding that the market is down 22% for the year. During contraction, bonds may seem a safe bet, but longer-duration bonds are also down roughly 29% for the year due to the
“Really and truly, cash is king in this current type of environment,” Herbst said.
At Cypress, which Ebzery explained is a fiduciary Independent Registered Investment Advisory firm, financial advisors first discuss with individuals his priorities and personal risk tolerance.
“If someone is 30 years old and wants to systematically invest into the stock market every month no matter what, that is fine. History has proven that is a great strategy,” he said. “But they also need to understand that there will be periods where they open their statement, and there will be times when they have lost money.”
Other investors, he said, may take a more conservative approach.
Overall, Ebzery said, the current period is unique. Now is a good time to pay down debt, and not take on any additional debt if possible.
Finding professional advice during times of volatility and having a relationship built on trust between a financial advisor and investor are key.
“Trust is a huge key. You want to be able to trust the person you are, in essence, trusting your livelihood with,” Herbst said, adding that because of the cyclical nature of investing over time, there is hope.
“It is also important to remember that this is a business cycle. The pain we are experiencing in terms of volatility right now — we will come out of this,” Herbst said. “There will be better days ahead.”
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