“Never tell me the odds,” fictional spaceship captain Han Solo quipped while dodging asteroids. The brazen qualities that make renegade space pilots so dashing are less useful in a wealth advisor. In our more analytical, risk-vs.-return perspective, life decisions can be viewed as a series of bets. When you choose to attend college, you do so thinking that your degree will be worthwhile. When you pick a job, you gamble that you won’t be fired. When you marry, you hope that your spouse won’t abandon you with a mortgage and three kids.
When we place these bets, it’s usually at the expense of other activities. College usually precludes working full time. You can’t diversify your career prospects by simultaneously working ten jobs. Most settle for a single spouse at a time. Our wagers can only be based on past information, and we don’t know if we’ve made the right ones until the end.
Investing is much the same way. You give up the ability to spend right now in the hopes that your wealth will grow. Your success is not guaranteed, and can only be evaluated ex post facto. But we like our chances. There were 127 twenty-year periods between 1871-2017. (1871-1891 is the first period, 1872-1892 is the second, and so on.) In all 127 periods, the U.S stock market made positive returns. This does not prove anything about tomorrow; as with everything else in life, the past doesn’t script the future.
But in a country where 34% of college grads get a career that doesn’t require a degree, 1% of the work force is fired or laid off each month, and the chances of your marriage ending in divorce or separation are 50%, the decision to invest long-term may be prove wiser than some of our other major life choices. There are plenty of college experiences, jobs, and spouses worth the risk. Unfortunately, wealth advisors are not equipped to tell you which ones. That’s alright though- as Han can attest, in matters of the heart it can be better to shoot first, question later.
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Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and Fortunam Wealth Management are separate entities from LPL Financial. Investing involves risk, including loss of principal.
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