We live in a time where most things are readily available to us. So many industries have adapted over time, and it has created this phenomenon of instant gratification. If you are trying to find information, no more going to the library to check out a book, just google it. You can practically get anything delivered to your residence with the click of a couple buttons. It’s hard to remember what life was like before “instant access”. We have seen this trend spill into investing as well. That brings up the question “Should I invest for the long term or short term?”
Obviously, we want to see our money grow as quick as possible. The allure of doubling our money quickly is a reason people like to go to the casino. Think of a roulette table. You walk in, pick red or black, then double your money or lose after that wheel stops. It happens so fast!
Now, imagine someone gave you the option to do that with your retirement account. I would hope that you laugh at the notion of that, but I imagine your answer would be something along the lines of “I can’t do that because I am saving that money for when I retire in 20 years!” The important part of that sentence is the time horizon. If you are investing your money for a specific amount of time, then it should be allocated appropriately for that time horizon.
When you invest your hard-earned money, you want to make sure that it is in accordance with your financial plan. If you do not have a plan in writing you should consider crafting one. Then, as you move forward in life, so will your financial plan. Each year when you review your plan you can tweak your investments if necessary.
Discipline is key! It is so easy to watch the news, look at social media, or hear a conversation about the newest investment “can’t miss” that is making headlines. Then all of a sudden the FOMO starts to creep in, and it can leave even the savviest investors wondering if they should alter their strategy. Think back to that roulette table we talked about, sure it would be nice to double your money but hopefully your discipline will not allow a game of chance to be your retirement strategy.
So, long-term investing vs. short term investing, what is better for you? The answer revolves around your goals. The key is to create a plan, then stay disciplined and follow that plan. Don’t try and “keep up with the Joneses.”
If you have any questions about how to start formulating a plan or want to examine your current plan, reach out to us at Redwood Financial. Starting with a 15 minute no obligation discovery call is a great way to ask more questions specific to you. We welcome the opportunity to start working with you. Let’s grow together!