All investing is essentially the art of putting cash in now to get even more cash out later. How much later usually determines the magnitude of your result. The so-called magic of compounding does require time to work.
For example, starting to save for retirement five years before you are set to retire will probably be unsuccessful. At the other extreme, if you put away money for your children's retirement when they are young, they may not have to save a dime for their old age. That is a powerful use of time.
Thousands of client relationships tell us that the five most common reasons to seek investment advice are:
- To finance a comfortable retirement
- To educate the next generation
- To care for parents in their final years
- To leave a legacy for their children
- To fund a major charitable donation
In each case, your task as an investor is to define your purpose and set a time frame within which your goal will be realized.
For example, if you are saving to pay for your child's post-secondary education expenses, you and your advisor will need to determine how much the future cost may be, your ability to contribute funds today and in the future, the expected rate of return on your investment, and how much time you have to accomplish your goal.
A similar set of questions applies to your retirement plans.
As you go through life, it increasingly appears that time itself is your most precious resource. You can't save up your time to spend it later. You must use your time now.
That is the spirit of a sound investment philosophy. What you must do is simply harness what time is available in the most productive way possible and apply the rarest ingredient of all - patience. The long-term reward of great investment advice is more time for you to do what you really want to do with your life, not what you have to do. Time is truly the best-kept secret of the rich.
For more ideas about planning for the future, please visit our Financial Planning page or fill out our Investment Advisor contact form.