Investing Often Provides Lessons Which Transcend Their Monetary Rewards
By Anthony Rhodes
It's no small coincidence that parents who invest, often have children who become investors also. This fact really isn't all that surprising when you think about it. After all, children frequently imitate the habits of their parents, and the most successful of those behaviors are generally adopted and incorporated for use throughout the child's lifetime. Accordingly, there truly is something to be said about the implications of discussing basic investment strategies while in the company of your children. Unlike most financial concepts, which are usually developed through trial and error, the rewarding benefits of investing are most effectively obtained by the knowledge generated from the early and continuous exposure to tools, such as mutual funds, stocks and bonds.
Why is this information so important, you might ask? Well, for starters, children who grow up in this type of household are inclined to become better at both dealing with debt and managing their personal finances, and are also more likely to attend and complete college; all top priorities on any parent's list. And while one can't point at investing as the sole reason for producing these results, its long-term positive effect on the family finances are unquestioned, which ultimately contributes to an environment conducive to such conclusions. So this week, we're going to take a look at the residual effects that investing has on our families. And, at the long-standing, non-financial lessons taught when one stops looking at investing simply as a means to procure wealth, but to instead focus on its transcending methodologies, which can so profoundly impact our lives in their very own right.
The Stock Market Metaphor
When most people look at the stock market, they see the manic, archaic domain of capitalistic individuals, vying for their share of Americas' burgeoning corporate prosperity. Their customary descriptions of a mere meeting place for buyers and sellers, helps to oversimplify its true complexities, and makes difficult the view of its beneficial parallels to the outside world. After all, what is the stock market if not the pulsating heartbeat of the engine that is America? Do not its rises and falls reflect the overall health of the nation's economy? And if that's true, aren't each individual company akin to the cells of the body, in which the decisions of its managers and CEO's are representative of either the cause or the cure of each potential ailment? This "big picture" analogy is but one of many useful stock market metaphors, which can be used to help your children to better understand everything from biology to physics and even quantum mechanics. Just as sports have been used both as a means to maintaining good health and as early preparation for the travails of life, the understanding of the stock market's workings is not simply monetarily beneficial, but can serve many learning applications, as well.
The Long Term Investment
The most successful investors are those who steer free of short-term fads and everyday trends, and instead focuses on companies with solid management teams and proven track records of performance. Such individuals know that the long-term quality of these companies will not only serve them well during ideal market conditions, but more importantly, will also help shield their portfolios from heavy losses during a down turn, too. Now, isn't this lesson transferable to our everyday lives, also? And couldn't its message help to anchor our children during periods of extreme pressure and moments of self-doubt? This strategy of concentrating on long-term quality instead of short-term gratification, serves many useful applications beyond its original financial intent. In fact, one could easily argue that its impact is more beneficial to our everyday lives than it is for our money! Just think of it coming into play during your own personal moments of weakness. When confronted with the choice of either accumulating debt to pay for a specific item now, or waiting a little while longer to purchase it with cash, that little nudge in the right direction, could make all the difference in the world.
The point of this post is to remind us that some of the various systems, mechanics and structures of our lives; regardless of their seemingly opposite natures, are principally governed by the same interchangeable set of rules. As in most of our experiences in life, the pattern of rewarding patience and careful observation, and punishing myopic views and reactionary impulses, transcends our educational, social and vocational boundaries; and puts in place the standardized notion that specific lessons can be successfully applied to generalized situations. Let's keep this in mind whenever we consider the many benefits of our investment strategies. And the next time you find yourself touting the recent performance of your portfolio, don't fail to mention that the approach was useful in other ways, also. After all, it isn't just about the money.
(Anthony Rhodes is a Registered Investment Advisor and owner of wealth management firm The Planning Perspective www.theplanningperspective.com)