{"id":167,"date":"2019-08-24T05:59:48","date_gmt":"2019-08-24T05:59:48","guid":{"rendered":"http:\/\/www.assetmultiplier.co.in\/blog\/?p=167"},"modified":"2019-08-24T05:59:50","modified_gmt":"2019-08-24T05:59:50","slug":"its-hard-to-think-long-term","status":"publish","type":"post","link":"https:\/\/www.assetmultiplier.co.in\/blog\/2019\/08\/24\/its-hard-to-think-long-term\/","title":{"rendered":"It\u2019s Hard to Think Long-Term"},"content":{"rendered":"\n<p><a href=\"https:\/\/theirrelevantinvestor.com\/author\/theirrelevantinvestor\/\">Michael Batnick<\/a> writes that one of the\nbiggest challenges investors face is their desire to tinker. Like Pascal said,\n\u201cAll of humanity\u2019s problems stem from man\u2019s inability to sit quietly in a room\nalone.\u201d<\/p>\n\n\n\n<p>You\ndon\u2019t dig up a young tree every time storms. It needs time to grow. The roots\ncan handle wind and rain and thunder. Likewise, a diversified portfolio needs\ntime to grow, and can also withstand some discomfort. Beyond discomfort,\ninvestors will have to survive tornadoes from time to time.&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/www.collaborativefund.com\/blog\/the-laws-of-investing\/\" target=\"_blank\" rel=\"noreferrer noopener\">Morgan Housel<\/a>&nbsp;recently framed how different investors\nmight deal with market turbulence: If you view every debt-fueled recession,\nmarket crash, and asset bubble as an example of your fellow people acting crazy\nyou might get cynical, which makes it hard to be a long-term optimist even when\nyou should be. If you view them as inevitable you realize they\u2019re just part of\nthe ride and an occasional reminder that the fasten-your-seatbelt sign should\nnever be turned off.<\/p>\n\n\n\n<p>So,\nfinally, here are the three things you can do to think and act for the\nlong-term:<\/p>\n\n\n\n<ul><li><strong>You can\u2019t think long-term if you\u2019re not saving money<\/strong>. Everyone knows what their income is, not everyone has a handle on the other side of the ledger. You don\u2019t have to create an agonizingly detailed spreadsheet of every Rupee that goes out, but you must have a rough idea of what you can afford to save every month. And those savings must be automated. When your income comes in, savings go out. Pay yourself first. (I understand that saving money is a luxury many people don\u2019t have, but if you\u2019re reading this, I assume you\u2019re one of the fortunate ones)<\/li><li><strong>You can\u2019t think long-term if you are experiencing a short-term cash crunch<\/strong>. The best way to avoid this is to keep your big-ticket items to a reasonable percentage of your income. Coffee won\u2019t break the bank, a mortgage and car payments can. The second best way to avoid a short-term cash crunch is to have cash in the bank. Six months seems reasonable, but if you\u2019re responsible with your bills, I\u2019m okay with having less.<\/li><li><strong>You can\u2019t think long-term if you take more risk than you can stomach.<\/strong>\u00a0If you thought about how much higher the market might be in twenty years, would you care how low it went tomorrow? In theory no, in reality, obviously yes. And this is where planning comes into play. If you really hate seeing your account go down, then figure out where your maximum pain point is and work backward. For example, if 10% is the maximum loss you can tolerate, using the assumption that stocks can get cut in half, you should have no more than 20% of your portfolio in stocks at any time. Of course, this will severely limit your upside, but investing isn\u2019t just about maximizing return, it\u2019s about maximizing a return that you can reasonably expect to achieve.<\/li><\/ul>\n\n\n\n<p>Batnick concludes that if these seem obvious to you, good, that\u2019s the idea. This isn\u2019t rocket science. Thinking long-term is hard, which is why it can be so rewarding. Acting on short-term impulses, on the other hand, is a short cut, which rarely works out well. The most successful investors are able to ignore the things today that they know won\u2019t matter tomorrow.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Michael Batnick writes that one of the biggest challenges investors face is their desire to tinker. Like Pascal said, \u201cAll of humanity\u2019s problems stem from man\u2019s inability to sit quietly in a room alone.\u201d You don\u2019t dig up a young tree every time storms. It needs time to grow. The roots can handle wind and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/167"}],"collection":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/comments?post=167"}],"version-history":[{"count":1,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/167\/revisions"}],"predecessor-version":[{"id":168,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/167\/revisions\/168"}],"wp:attachment":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/media?parent=167"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/categories?post=167"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/tags?post=167"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}