Spokane Journal of Business

Investors should be aware of what they can, should control

Data shows investing in markets long-term has hedged inflation

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We can control limited things in our financial life, and focus is one of them. It is extremely important where we put our attention. Ideally, it should be at the intersection of what truly matters to us and what we can control.

This is where we financial advisers put most of our time and energy, and we strive to make it both quantifiable in measure and understood from a gut perspective.

So, let’s look under the hood at both the art and science of focusing on the intersection of what matters and what we can control.

Things that matter: This is the science behind the process of getting to know new clients. It establishes your “why” behind the reasons you invest and allows us to create the appropriate benchmark for your investment plan, or the outcomes you want to realize in life. If money is just a tool for you to experience the things you believe in—your nonnegotiables for living your best life—shouldn’t your investment plan simply be a function of helping you realize them?

Things you can control: The needle is really moved not just by defining things you can control—your savings, debt control, cash flow, estate planning, gifting strategies, tax strategies—but how you think about things you can’t control—your perspective. So many times, we expend so much energy on the uncontrollable that we have little to no energy left to focus on the things we can control. Perspective, in this case is the cure. We can control our perspective and the story we tell ourselves when we start mentally spinning on these things that really do exist but are out of our control.

Let’s play out one real life scenario I continually come across with clients when we sit down: Inflation.

A common perspective is that inflation is not only out of control, but prices are also never going down. Our cost of living is up, yet our investments are down year to date. If our investment portfolio is supposed to be an inflation hedge, then it isn’t working. Pile on mid-term elections, the Fed raising rates with no end in sight, and out-of-control government spending. This is a perspective many folks I’ve been chatting with recently are choosing to take. Of course, the media loves it too. It’s depressing, it’s stressful, and it’s not fun.

For the perspective on inflation that I choose, let’s take a little advice from a thought leader in our industry, Nick Murray. Let’s run through a quick exercise looking rationally at real data to play this one out.

•In 1969, the S&P 500’s dividend per share was roughly $3.25. In late 2022, the dividend was closer to $65 per share. That’s a 20-fold increase.

•In 1969, core inflation—based upon the consumer price index readings with a 1984 baseline of 100—was sitting at 38. Today it is closer to 300 and moving upward, an eight-fold increase.

Common sense simply would tell us that the increasing dividends from 500 of some of the most important companies to us as investors have far outpaced the rate of inflation since 1969.

As the old saying goes: History does not repeat itself, but it rhymes. And the correct perspective on your investments being one of the best and consistent hedges on inflation is backed by rational thought and actual data. This leads me to feel one thing on my personal financial future: optimism.

It is amazing how a little shift in perspective can have massive impacts on even the things we cannot control in our financial life.

  • Dave Gordon

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