"In most countries, investors today have the miraculous privilege of being able to compound their wealth over long periods without facing the apocalyptic forces that have wreaked havoc throughout history. What a sad irony that so many people are choosing, instead, to act like short-term gamblers."
- Jason Zweig on why almost everyone loses on prediction markets, WSJ May 3
As markets continue reaching new highs, investors are once again being tempted by the latest "better way."
AI stocks. Option strategies. Leveraged ETFs. Tax tricks. Prediction markets.
The financial industry never runs out of shiny objects.
But successful investing remains surprisingly simple.
We own businesses.
Those businesses earn profits, pay dividends, and grow over time. When dividends are reinvested, they buy more shares, which generate more dividends, which buy more shares. That's compounding—and it's one of the most powerful wealth-building forces available to investors.
That's why one of the most important rules of investing is:
Never interrupt the compounding.
When markets become volatile, many investors focus on the wrong number: today's account value.
Instead, consider focusing on the income your portfolio produces. While stock prices fluctuate, quality businesses continue selling products, earning profits, and paying dividends. Over time, that growing income stream can become a powerful source of financial independence.
It's also worth remembering that your portfolio was never designed to beat your neighbor's portfolio, a benchmark, or the hottest investment trend.
It was designed to achieve your goals.
When we built your investment plan, we focused on your retirement, your spending needs, your family, your legacy goals, and the level of risk appropriate for your situation.
Your portfolio has a job description.
If it is helping you move toward your goals, then it is doing exactly what it was designed to do.
The shiny objects will always be there. The temptation to compare will never go away.
Our job is to stay focused on the plan, allow compounding to work, and avoid interrupting the process.
Looking neither to the right nor the left.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Securities and Retirement Plan Consulting Program services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC. Advisory Services offered through Western Wealth Management LLC, a Registered Investment Adviser, dba Kennebec Wealth Management. LPL Financial, Kennebec Wealth Management LLC and Western Wealth Management LLC are separate entities.