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Perspective is a valuable trait in personal finance, especially investing, and thankfulness is a fundamental aspect of forming healthy perspectives.
For example, when you are thankful for what you have, you can enable yourself to find satisfaction and contentment, which will reduce or eliminate the most destructive emotions for investors – fear, greed and hubris.
How many times have you made incredible gains with a particular stock or mutual fund, but failed to lock in your gains or rebalance your portfolio by selling shares, because you felt the security would continue climbing in price?
Or similarly, have you bought more shares of a losing investment because your ego prevented you from admitting that you were wrong to keep holding it?
The presence of thankfulness in these investment scenarios would have you content with what you have already gained, or that you had not lost more, and your subsequent portfolio management decisions would thus be made with a more rational mind.
Why Retail Investors Should Be Thankful
So let’s return our investor minds to a content and rational state by observing three things we can be thankful for in 2015:
- Bull Market Longevity: 2015 has been a challenging year for investors, so if you are looking for something to be thankful for this year, just look back to the incredible bull market run that started in March of 2009. Even if Thanksgiving 2015 marks the end of the current bull market, it will go down as the third longest in history. And if this bull run can last through April 2016, it will become the second longest in history.
- Low (But Soon-to-Rise) Interest Rates: While some investors have good reason to frown upon the Fed’s long-standing easy money policy, and the resulting unhealthy expansion of the government’s debt side of its balance sheet, there is also cause to cheer the low-rate positive impact in the form of years of corporate and consumer debt consolidation, as well as an expanded bull market for bonds. And as 2015 comes to a close, most investors will be thankful for a Fed rate hike, if it comes, because the increase will signal a normalization for the U.S. economy. Therefore, all investors, no matter their perspective, can be thankful both the long-term low-rate environment but also its unwinding.
- A Happy Consumer: The leading industrial sector, by far, is consumer discretionary (or consumer cyclical) stocks. Lower unemployment, higher wages, higher 401(k) balances, rising home values and low gas prices combined in 2015 for a wealth effect that turned into more consumer spending. For evidence, look no further than Consumer Discretionary Select Sector SPDR ETF (NYSEArca: XLY), which has a year-to-date gain of 13.4%. Compare that to the SPDR S&P 500 ETF (NYSEArca: SPY), which is up a mere 2.6% thus far in 2015. And the consumer spending may well continue to surprise to the positive side through the holiday spending season.
It’s doubtful many retail investors will share their positive economic and market perspectives around the Thanksgiving dinner table this year, or any year for that matter.
But the point of this article is that investors are smart to reflect more on what they have and what they have gained rather than on what they do not have or what they have lost.
And this perspective may be a reminder of other annual investing habits, such as rebalancing portfolios, tax-loss harvesting and increasing retirement account contributions in the new year.
This way, you’ll produce more reasons to be thankful in 2016.
Kent Thune is the owner of an investment advisory firm in Hilton Head Island, S.C. He personally does not hold any of the aforementioned securities. However, he holds XLY in some client accounts. Under no circumstances does this information represent a recommendation to buy or sell securities.
This Is Making Ordinary People Rich
Ordinary people across America are getting insanely rich. Take Gladys Holm. She never earned more than $15,000 a year as a secretary. But by making one simple move, she was able to leave an $18 million fortune to a children’s hospital when she died. There’s many more just like her.