Mar 28, 2023
Managing Wealth Takes Patience
I’m not a patient person. Just ask my wife, kids, co-workers, family and pedestrians I’m walking next to—or the person parallel parking in front of me. I think you get the point.
Why is that? Why am I so anxious for certain things to happen in life that I miss all of the good stuff in between?
I’m probably not alone in being so excited to get to the next thing that I ignore all the pleasant things that come with taking your time and living more in the moment. Clearly, I still have a lot to learn about enjoying life a bit.
So, what does patience have to do with your finances, planning and how you invest? To me, absolutely everything. Think of these three examples:
1. Patience with the market
With a number of macroeconomic and geopolitical issues plaguing the markets throughout 2022, many investors endured a rough ride. In fact, it was the worst overall year Wall Street experienced since the global financial crisis of 2008. The S&P 500 Index lost almost 20% in 2022.1 With conditions appearing bleak and uncertainty persisting, it’s not surprising that investors tended to be cautious heading into 2023, perhaps even moving to the sidelines to avoid further losses.
However, if an investor made rash decisions late in December to keep their assets in the “safety” of cash, they would’ve missed out on the following month’s rally, when stocks rebounded. For instance, the S&P 500 rose by more than 6% in January.2
The market’s tumble in 2022 created anxiety and worry for many investors. That’s why they may have acted emotionally and sold their stocks. I suggest trying not to succumb to emotions when investing. You can lean on your CI Private Wealth Advisor during those challenging times to understand why being patient can pay off over the long term.
And ask questions as well. There are no bad questions in a volatile market. It’s our job to talk through the noise and help you feel better about the path ahead. As investors, we’re anxious to see good returns or even stable returns when the market gets volatile. It’s simply human nature to lose your patience.
2. Patience with diversified investing
I believe one of the basic tenets of investing is to keep your portfolio well diversified. Having adequate diversification is a strategy for helping to manage overall risk in a portfolio while also enhancing return potential. It’s common to split your investments across stocks and bonds to achieve greater diversification, but I believe most investors should take it further. For example, your stock holdings may be diversified by geography, sector and industry, giving your portfolio valuable exposure to a range of companies that will perform differently under different market conditions.
I recommend keeping enough patience so that your diversification strategy is given ample time to function as intended. I don’t have a magic answer on when this strategy might begin performing as hoped. But over time, I’m confident that diversified holdings can bring value to our client portfolios as some companies will outperform when others are struggling, and vice versa. It’s similar to a musical quartet, when the violinist and cellist might be having an off night, but the viola and second violinist pick up the slack. The strength of the quartet will come through in the overall quality of the music, and I expect your diversified portfolio will likely deliver over the long run, provided you remain patient.
3. Patience with your planning
General George Patton is famous for saying something along the lines of, “a good plan violently executed now is better than a perfect plan next week.”3 I’m certainly not planning the Allied invasion of Europe with my clients, but I am helping plan for some very important life events.
Work with your team at CI Private Wealth to understand the framework and details of your personalized plan. Don’t worry about it being perfect. Life will change whether we can control it or not. So, your planning should be dynamic and your team can adjust the plan to fit your evolving life.
For me, the real danger is not having a plan at all. I don’t believe it needs to be the absolute perfect plan, but there needs to be a plan in place to guide you and be adaptable when required.
Don’t be impatient like me. Understand the moment you are in, experience it fully and don’t allow the uncertainty of the future to create undue anxiety. Easy for me to say, but so much harder to do.
1 https://www.cnbc.com/2022/12/29/stock-market-futures-open-to-close-news.html
2 https://www.spglobal.com/spdji/en/commentary/article/us-equities-market-attributes
3 https://www.oxfordreference.com/display/10.1093/acref/9780191826719.001.0001/q-oro-ed4-00016315
ABOUT THE AUTHOR
Nick Cosky, CFP
In his role as Wealth Manager, Nick is primarily responsible for introducing prospective clients to BDF. Nick has served as the head of BDF’s Financial Planning Committee and has participated on the Business Owner Team. He is passionate about the goals-based planning that BDF does for its clients and enjoys focusing on the behavioral aspects of decision making. Nick is a CFP® professional.
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