The circumstances may be different, but the message is still relevant

by Alan Friedman

Back in 2016, we wrote a blog post about every successful investor’s secret weapon: Compounding. And in that post we also suggested that everyone should read the late Richard Russell’s classic letter, “Rich Man, Poor Man.”

In it Russell, who was the publisher of Dow Theory Letters, explains that “compounding is the royal road to riches, it’s the safe road, the sure road, and fortunately anybody can do it.” If you haven’t read it, and even if you have, you should read it again — because it’s particularly relevant in our current environment, which is exactly why I’m bringing it up again. You can find it here:

If you ask most investors why they invest, the answer will be the same — to make money. In theory, there’s nothing wrong with it. In fact, we’ve just come out of a long bull market when we were doing just that.

But where that objective can derail us, is when that’s all we focus on — and when we find ourselves in markets like we’re in right now, in times of instability and volatility, and when we feel that we don’t know what to do and we lose our perspective and our patience.

We forget we’re In it for the long term.

We have to be smart. We have to be strategic. We have to be prudent. We have to be patient. We have to remember that when things stabilize again, which they inevitably will, we’ll see plenty of opportunities for growth again.
 

So for now we need to focus on our long-term objectives and goals, knowing we’re receiving income from the investments we have — which will compound and keep compounding.

We have to remember this isn’t forever. This is temporary, and this too shall pass.  And then we have to remind ourselves what we’re investing for. Which is the future.

In the real estate industry three of the most important words are “location, location, location.” In investing it’s “compounding, compounding, compounding.” So don’t be surprised if I blog about it again and again and again.

Alan Friedman is an Investment Advisor with CIBC Wood Gundy in Toronto. The views of Alan Friedman do not necessarily reflect those of CIBC World Markets Inc. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Regulatory Organization of Canada. If you are currently a CIBC Wood Gundy client please contact your Investment Advisor. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.

@AlanFriedmanWG