Time is precious. Time and tide wait for no person. There’s no time like the present.
I don’t have time for this.
Our lives are built around time. We have clocks everywhere to remind us if we’re on time or if it’s time for lunch. With such a preoccupation, it’s no surprise that the most common reason people give for not addressing their financial goals or checking on their investments is that they don’t have time.
Around the world right now, people are adjusting to working from home and avoiding social events. As a result, most of us have much more time on our hands than usual, but for some reason the investment needs still aren’t met. This shows that time was never the issue; There are just lots of other things much higher on our lists of priorities.
Time is incredibly important to every investment. It can either be your biggest threat and a huge source of pressure, or your most valuable asset and a powerful tool. Lots of people ask financial professionals “Is this the right time to invest?” The answer should be simple: “Yes.”
If you need to invest, the right time to do it is now. Not because there is a unique opportunity in the market or because a particular asset is at a certain price level, but because the earlier you start, the more time you have. The longer your investment stays in a market, the more opportunity it will have to recover from negative movements or to benefit from positive ones. As the old adage goes: ‘Time in the market, not timing the market.’
Compound interest is one of the principle gifts that time can give to your portfolio. The longer your investment stays in a growing investment, the more its returns will compound. Of course, the same is true for negative returns, but throughout history, periods of growth have been much longer than periods of contraction. By giving ourselves more time invested, we maximise the opportunity to benefit from the long period of growth that will follow any downturn in the markets.
But wait just a minute. Before you rush off to find the nearest investment solution and charge headlong into it, consider the far more important application of time to your own portfolio: Your individual goals and needs.
An investment without a specific goal is little more than collecting coins. The most important consideration in any financial plan should be what you need and when you need it.
Time can be an opportunity or a threat, but it should also be one of the principal determining factors in your risk profile and portfolio structure. If you need the money next week, then 30-day liquidity and high volatility are not for you. If you intend for your money to be locked away for thirty years, then an inflexible, low-return fixed income bond might present more risk than you expect.
When considering your personal financial goals, timescales are vital. We all arrange our lives according to now, soon and later. Your investments should be no different. Plan carefully for when you should be on target and for how often you need to reassess. Your financial advisor should be helping you to structure your financial life around the times in the future that will matter to you and your money, with the flexibility to take time out or add a little more time where it might be necessary.
Above all, don’t waste time. Take a moment to look at your personal goals now and make sure time will be on your side.