It’s about time

“How long a minute is, depends on which side of the bath­room door you’re on.”

— Zall’s Sec­ond Law

It finally hap­pened this past week. My daugh­ter couldn’t wait for this day to come, and I have been fear­ing it since her birth. I have to admit, there is some­thing spe­cial about 16 can­dles on a birth­day cake. After years of fear­ing this iconic moment in my daughter’s walk towards wom­an­hood, I found myself filled with hap­pi­ness as she embraced the cel­e­bra­tion and I was reminded what a joy the last 16 years has been.

Maybe time isn’t against me after all. Maybe there’s more to be done with time than only look­ing for the best way to deal with it’s pass­ing. How do you feel about time? Are you rac­ing against it, or is time on your side? Is Father Time a char­i­ta­ble giver or a devi­ous thief?

There is an unbreak­able bond between time and money. We are cap­ti­vated and dri­ven by both. Ben­jamin Franklin even famously pro­claimed that “time is money.” No won­der he got his face on a $100 bill. Yet, despite man’s best attempts to ele­vate both to equal sta­tus, we must rec­og­nize that one is greater than the other. Time has value all on its own with­out the help of any­one or any­thing, and is con­stantly adding to or steal­ing value from money. But have all the money you want, you still can’t buy time. In any cir­cum­stance, the real value of both time and money is only expe­ri­enced when we are actively engaged with them.

The real ques­tion is: Are you as actively engaged with your time and money as you could be, or has life lulled you into a time and money nap?

Real­ity check: One of the most pow­er­ful and attrac­tive aspects about invest­ing is the magic that can hap­pen when you com­bine time and money. They acti­vate each other and cre­ate oppor­tu­ni­ties that nei­ther could pro­vide alone. We sim­ply need to let them spend as much time together as possible.

The impor­tance of get­ting invested and stay­ing invested can­not be overem­pha­sized. Con­sider the per­for­mance of the S&P 500 from 1970 through 2009. A $100,000 invest­ment over that time period in an index fund that tracked the per­for­mance of the S&P 500 and matched its returns would have grown to $4,961,400 (minus expenses)!

Often times, the market’s best daily returns occur after some of it’s worst per­for­mances. Freak­ing out and pulling all your money out of the mar­ket after a los­ing period can have a dev­as­tat­ing impact on your port­fo­lio. By miss­ing only the sin­gle best per­form­ing day dur­ing the 40 year time period, just one day out of 40 years, your invest­ment suf­fers a $512,200 loss for an end­ing value of $4,449,200. Miss­ing only the best 10 days out of those 40 years would cut your returns nearly in half to $2,186,801. Clearly, much of the stock market’s strong returns can be attrib­uted to only a small num­ber of days. If you are look­ing for strong returns from the stock mar­ket, you must be com­mit­ted to your invest­ment strategy.

Real Advice for Real Peo­ple: Time is nei­ther for or against us. It’s sim­ply offer­ing to us a chance to expe­ri­ence every­thing it brings to the table. The Stock Mar­ket is no dif­fer­ent. Sure, we will have good times and we will have rough times, but it sure beats liv­ing in fear of the future. Con­sider your time frame, mea­sure the risk, invest with a plan and stick with it. The amount of time you allow with your money is more impor­tant than the amount of money you invest. So give time and money a lit­tle roman­tic get­away in a well man­aged invest­ment account and see what happens.

RC Arse­neau is a cer­ti­fied finan­cial plan­ner who lives with his fam­ily in Delaware. Please sub­mit any ques­tions or topic requests to AskRc@mail.com.

The infor­ma­tion and opin­ions in this col­umn are pro­vided only for edu­ca­tional and enter­tain­ment pur­poses. Any ref­er­ence to a finan­cial prod­uct or strat­egy is not to be con­sid­ered an endorse­ment or rec­om­men­da­tion. The infor­ma­tion is of a gen­eral nature only and does not take into account your indi­vid­ual objec­tives, finan­cial sit­u­a­tion or needs. It should not be used, relied upon or treated as a sub­sti­tute for spe­cific pro­fes­sional finan­cial, legal or tax advice. Invest­ment Per­for­mance may vary due to tim­ing and expenses. Rc rec­om­mends that you obtain your own inde­pen­dent pro­fes­sional advice before mak­ing any deci­sion in rela­tion to your par­tic­u­lar require­ments or circumstances.

Posted by RC Arseneau on Apr 25 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.