Context is the Key
By Tom Kirk
Here are a few apparently contradicting financial strategies:
What if I now told you that all of these apparently contradicting financial strategies are true? That’s right … all true! No wonder it is so hard to make confident decisions about what you should do to create the financial future you have in mind. You obviously can’t implement all these strategies at the same time. So how are you to choose, if they are all true?
The context of your unique individual situation is what makes each of these strategies true or false for you.
Let’s take investing in the stock market for example. Yes, the stock market has delivered investment growth in the past. And yes, there are some periods of time the stock market loses significant value. The important context here is time.
There are a lot of one calendar year periods of time in which the S&P 500 has lost money. But there are only seven such five-year periods of time over the last fifty calendar years. And there are only two such ten-year periods of time over the last fifty calendar years¹.
So you should only invest money in the stock market that you expect to leave invested there for at least five years or longer. That way the passage of time can work for you to reduce the risk of losing money on your investment. If, on the other hand, you expect that you will need the money within five years for a down payment on a house or to fund a college education, you should consider less volatile options such as bonds or CDs. That way the money will more likely be there when you plan to spend it.
There are hundreds of different financial strategies and almost all of them have an appropriate application, but only in the right context. This is why it is critical to first have a clear and complete understanding of your current financial condition and to identify and quantify your tangible financial goals. This defines the context within which you can then determine whether any particular strategy helps you create the financial future you have in mind or not. Without this context, you are just stabbing in the dark when you decide to implement one financial strategy over another.
Find out what it might be like to have a personal WealthCoach by your side helping you make smart decisions about your money and creating the future you dream of. Call our wealth services firm in Satellite Beach, FL – Melbourne/Brevard area at (321) 773-7773 to schedule your complimentary initial consultation.
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