What’s the point of money if we don’t get to enjoy it?

Recently, I went on a trip with my wife to Banff, Canada. We spent 4 days together and it was quite enjoyable. We hiked, we ate, we drove, and saw some of the most beautiful and amazing views we have ever seen.

Although the financial commitment of our time together was relatively minor, it got me thinking about how this applies to why I save and how I spend. And, just as importantly, how do these questions and answers relate to long-term retirement planning?

 Why do we save our money? At times, we find ourselves so focused on saving for the future, saving up for what’s coming next, that we forget to enjoy the small and simple pleasures of life right now. Money is for our fulfillment. We are meant to enjoy life now as well as later on.

Reflecting on the trip with my wife, the opportunity to try something new, coupled with the hours we spent together, made that a very memorable and enjoyable experience. It’s moments like these that remind me that we make money to enjoy experiences in life.

What do you enjoy in life? Where do you find fulfillment? Is it the purchase of something new for your home? Is it an experience, such as a trip or sporting event? Is it a $30 date with a child or grandchild, or is it something more? We should be using our money to find that enjoyment and fulfillment. That doesn’t mean carelessly throwing our money at anything that catches our attention. Instead, it means using and saving our money with the intent of finding enjoyment in life.

The Power of a Smile

In today’s economic uncertainty and increasing costs all around us, there is one thing I believe that has not changed its cost. A smile.

The power of a smile is often underestimated, as it can have a profound impact on the people we come in contact with every day.

A few years ago I started to take some trips by myself to see different parts of the country. I say by myself to differentiate that when I travel with my wife, she has asked that our accommodation be a little nicer than when I travel alone. Personally, I don’t need much as I am usually, staying for just a few hours and then hitting the road after a good night's sleep. Although I am not staying at 5-star accommodations, I have found one thing that can make all the difference in the world. Does the person at the front desk know how to greet me with a smile?

One experience a few years ago that really keyed me into the power of a smile was a small hotel on the coast of Oregon. Both when I checked in, and then when I would come and go over the course of the two nights I stayed, the person at the front desk could barely say hello, nor offer a smile, which made for a very uncomfortable few days.

Despite this experience, I think most people are pleasant and give relatively decent smiles. I can say that it does not matter the type of business I am visiting or calling. A smile is the universal gesture of friendliness and warmth. I think we can all agree, that it can strengthen relationships and convey openness.

I know I am not perfect, and have some less than ideal days, but I hope when you call my office, email me or even see me in person at the office or in the community, you are met with a smile. I know that it doesn’t take much to do so, but can make all the difference in the world!

KEEPING YOUR EYE ON THE BIG PICTURE

Regularly, I receive articles from some of the investment companies I work with about different aspects of the stock market. Recently there was a post that made me stop and re-review the information because it hit close to home because of frequent conversations I have had with clients this year.

The U.S. stock market has had two steep declines this year that caught many investors off guard. The first was April 1 through April 19 when the stock market dropped close to 6%. The second was just a few months ago, from July 16 through August 5 when stocks fell roughly 8.5%. When there are sharp declines in the market and the daily headlines remind us to focus on these events, what gets missed is how well the U.S. market has performed for the entire year. Through the end of September, the S&P 500 was up close to 21%. This is much higher than the index’s average yearly return of 10.26% since 1957.

While the stock market volatility can be daunting, it also presents unique opportunities for those willing to look beyond the current noise. An important factor to consider is not overreacting during sharp market declines as it could be a momentary hiccup, in an otherwise upward direction. The Russell 300 had an intra-year decline of at least 10% in 25 out of 45 years since 1979. Of those 25 years, 17 of those years, the index ended higher for the year.

Navigating market volatility can be challenging. The stock market will always have ups and downs. How you respond can make all the difference in the long run. 

Should I Stay or Should I Go?

With all the crazy movement in the markets over the last few weeks, I am posting a great article written recently by Dan Caplinger.

The Best Argument for Long-Term Investing in Turbulent Markets

Anyone can look at the performance of the stock market over the past 100 years and understand how powerful long-term investing can be. Amid all the ups and downs along the way, the value of stocks has consistently gone up, building wealth for those who've had a disciplined approach.

Actual investing isn't always that easy. It's one thing to understand in your brain that a strong recovery has followed every big drop in the past. It's a completely different thing to have the conviction in your heart that the current downturn will eventually follow the same path to recovery.

Missing the Best Market Days Will Cost You

Many investment professionals use a simple argument to urge clients to follow a long-term investing approach. This argument points at the cost of missing out on the best days of stock market performance. 

One study from the asset management arm of JPMorgan Chase noted that the S&P 500 returned an average of 9.2% per year for the 20-year period ending December 2021. That's consistent with the longer-term average return for stocks. However, if you took out just the 10 best days in that 20-year period, your total return would've fallen by nearly half. Miss the 30 best days, and nearly all of your positive returns would disappear.

This concept holds true for even longer periods of time. A different study from Bank of America looked all the way back to the 1930s. In each decade since then, missing the 10 best days in the 10-year period cost investors a huge amount of return. In the 1940s and 1970s, it turned a healthy positive return into a substantial negative one.

Why This Trap Snares So Many Investors

When I first saw those studies, I immediately wondered what would happen if you missed the 10 worst days in the market. Predictably, returns went way up. The Bank of America study actually looked at missing both the best and the worst 10 days, and those total returns tended to be slightly higher than the actual return of the market throughout the period. 

But here's the problem: Human nature doesn't work in your favor with market timing. Most people never think of selling their stocks when prices are going up. With the positive reinforcement of rising portfolio values, it's easy to be a long-term investor. 

It's only when the market has already dropped that most people think about adopting timing. The danger there is that all too often, the best days in the market come on the heels of the worst days. Consider some great examples:

• The stock market crash of 1987 saw the Dow drop 508 points to 1,739, or 23%. However, just two days later, the Dow jumped more than 10%, completing a two-day rise that recovered more than half of that lost amount. If you'd sold on Monday, you suffered the loss but missed the gain.

• The financial crisis of 2008 included a couple instances of this phenomenon. An Oct. 9 drop of 679 points came just before a rebound of 936 points on Oct. 13. Another drop of 733 points on Oct. 15 got more than reversed by the Oct. 28 gain of 889 points.

• Most recently, the pandemic-induced bear market of March 2020 saw several wild swings. The March 9 drop of 2,014 points preceded a March 10 gain of 1,167 points. The Dow answered the following March 12 drop of 2,353 points with a March 13 recovery of 1,985 points. Lastly, the 2,997-point decline on March 16 didn't produce an immediate bounce, but those who sold out missed the March 24 2,113-point rebound.

Notice that in many of these cases, the rebound didn't immediately claw back all the lost ground from the decline. Nevertheless, without the discipline to stay invested, you suffered the losses without the gains.

Better Days Will Come

Nor should you assume that the bounce will come days or even weeks after a decline. Some bear markets have taken years to play out. That's especially painful, and it puts even the most seasoned investors to the test.

However, the most difficult lessons are those in which you get a quick reminder of why panicking was the wrong move. The best way not to miss the best days in the market is not to let the bad days scare you out. That's easier said than done, but it's crucial to your long-term success in investing.

I'm tired of people calling me cheap

I recently read a research paper around tightwads and spendthrifts, tightwads being those who only save money because it pains them to spend, and spendthrifts irresponsibly spending their money. This research paper talked about the difference between spenders and savers and the emotions that drive these behaviors. Do these behaviors relate to the pain or the pleasure in spending money? I resonated with this because of my own behaviors in spending money. Because of my experiences in life growing up with a big family, I find myself in the boat of tightwad behavior. My entire life, I've been called cheap. The definition of cheap is someone who doesn't like to spend money, especially in situations when they can and should. What then is the difference between being cheap and being frugal? To me, being frugal means making better use of my resources and, in turn, making me feel good about how I spend my money. So, instead of calling me cheap, shouldn't you call me frugal? Or better yet, Frugal Dougall? Where do you feel you lie on the spectrum of cheap vs. frugal?