ARBOR OUTLOOK: Building Rome one day at a time
“May your hands always be busy … may your feet always be swift; May you have a strong foundation … when the winds of changes shift." — “Forever Young,” as performed by Bob Dylan
My parents often required my brothers and me to work in my mom’s restaurant and perform household chores, while my dad labored as a union carpenter. Like most kids, we attempted to placate them in an effort to postpone our duties.
If I really wanted out of a job, I would say, “Take it easy, dad, Rome wasn’t built in a day.” Hearing this, he would smile and offer this comeback: “You’re right, Rome probably wasn’t built in a day, but I bet part of it was.” The message was clear: you can’t do all your work today, but you can do some of it.
My dad, like his father, was a master craftsman. He worked on many of Chicago’s greatest buildings, watching them go from foundation to peak, while contributing his skills on each floor during the process. He cared for his tools, knew the value of solid construction and stayed on schedule.
Investing for the long term is somewhat akin to skilled carpentry. It takes time and acumen. Sometimes new investors ask themselves or an advisor, “What kind of return can I achieve in a year?” The better question is “How can I reach my financial goals in 10 or 20 years?” A portfolio should most often be constructed, like a building, for the long-term, with the durability and strength to withstand the rigors of market downturns.
A common misperception by new investors is that they’ll find a great investment, make some money, and cash out. But that’s not the way most investors become wealthy. Everyone would love to achieve the quick score, but enjoying repeated, moderate gains while avoiding large “haircuts” is the more predictable path to prosperity. That’s not to say that large gains aren’t desirable; they obviously are. But chasing huge returns in a short time period can often mean accepting large setbacks. This can significantly impede an investor’s progress, especially in the initial years of retirement. Portfolios, like an office or residential edifice, should be constructed to last.
Trimming, adding to, monitoring and adjusting your portfolio is an ongoing process, much like erecting trusses and shaving pieces of wood to size. Portfolios, like buildings, are occasionally struck by suddenly changing conditions. The foundation must remain firm to withstand the volatility. And the investor who has built a bed he is prepared to sleep in is not worried about seismic tremors in the market.
Market conditions are always changing. While building a portfolio that can survive unforeseen storms can be a significant challenge, it is usually the path to success.
Margaret R. McDowell, ChFC, AIF, author of the syndicated economic column "Arbor Outlook," is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a “fee-only” registered investment advisory firm located near Sandestin.