If you’re an individual investor, you have a lot to be thankful for.
The recent U.S. market rally is plenty of reason to feel good as the calendar hits the holidays, but that’s a bit like feeling thankful on Thanksgiving because there’s a good football game on television. Yes, you may be happy to watch it, but the greater joy — and reason to give thanks — is that you can share the experience with family and friends.
The things investors should be grateful for are less tied to short-term results and more to how they can succeed in all conditions over time. They are like the side dishes on a Thanksgiving table: they can be shared and passed around and there’s enough for everyone. Moreover, like holiday traditions, they are there every year, in all conditions.
Thousands leave post-it notes on NYC subway wall
Since Election Day, more than 10,000 positive post-it messages have been left on a wall in a New York City subway station by people from around the world.
Savers and investors alike can be thankful for:
Compounding: Just as parents spend every holiday thankful for the blessings of their children, so should investors be grateful for the undeniable power of compounding.
Compounding is the ability to generate earnings from previous earnings. It’s how a $2,000 Roth IRA deposit made by a 25-year-old and growing at 6% annually turns into more than $20,000 by the time that youngster reaches retirement age. It’s how small amounts of money become large amounts, given enough time, and it’s free, just for setting money aside and letting it work.
Employer matches on retirement savings: Anyone who has an employer that matches your savings — and sadly, too many workers do not — should be grateful to have been given a real leg up on generating a significant portfolio that beats the market.
The market doesn’t give us guaranteed returns; an employer match is a guarantee. Whether your employer gives a small match or a full one, you should be thankful for — and take advantage of — what you’re getting, because it’s the best deal out there.
Index funds: You don’t have to like or use index funds to be thankful for them, because the ability to buy shares in, for example, the 500 stocks in the SPDR S&P 500 exchange-traded fund SPY, +0.05% at an annual cost that is fractions of pennies on the dollar has forced all money managers to be cost-conscious, and to prove that their methods might be a superior choice. Everyone pays less for investment management simply because no one is willing to pay any amount that is ridiculously higher than what it costs to buy the index.
Moreover, index funds have allowed shareholders to capture the market’s return over time. That has been a particularly good investment over the last seven-plus years, and has helped investors create financial plans they can stick to when times look turbulent. That’s easy to overlook in the long-running bull market, but it is something most people will be thankful for whenever the market turns.
Low trading costs: Some industry critics worry that low-cost trading encourages average investors to make more moves — increasing the chances of short-circuiting their portfolios. In truth, reasonable transaction costs allow investors to manage their holdings better.
There may not be reason to be thankful for each trade, but be grateful that the days of getting soaked for making a trade — good or bad — are gone and that you can make the moves you believe are smart and savvy at a reasonable price.
Social Security: There’s no denying the flaws and problems in the system; it’s current status lies somewhere between badly injured and completely broken. But talk to any retiree who lived through the financial crisis of 2008 and you’ll understand why you should be thankful for a safety net that will provide a backstop when the market tanks again.
Social Security is not meant to be your sole support in retirement, or even a huge part of your income once you stop working, but it’s a nice salve for the financial mistakes most savers and investors make throughout their lifetime. For as much as we can grumble about the politics of it, the cushion it creates remains worthy of appreciation.
Health insurance: We can politicize the subject after the holiday, but if you have health-care protection and if it has done its job this year — giving you benefits and coverage you needed to stay healthy — it’s a blessing.
The nation has a health-insurance crisis that will not be easily solved. You may not like the coverage you can afford or the benefits it provides. You may not like paying for it if your health is perfect. And you may not like the overall health-care system that makes medical costs so outrageous.
But appreciate the positive outcomes, if you have been fortunate enough to have them. Talk to people with real medical issues but little or no coverage, or families that have been through medically induced bankruptcy, and you will be grateful for what you’ve got, even if you know there could be something better out there.
All the things money can’t buy: No matter how your portfolio does, it’s important to remember that the best things in life are free. Holidays and spending time with family tends to prove that to us, but it’s something we should be thankful for every day, no matter what the market is doing.
By Chuck Jaffe
Source: http://www.marketwatch.com/story/investors-have-much-to-be-grateful-for-this-thanksgiving-2016-11-23
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