Your destination won’t change, unless you do

Having the best of intentions or the perfect plan is not enough. There needs to be action to have any chance of success.

I was reminded of this three times recently.

The first one was where some new clients received an inheritance a few years ago. Without knowing what to do, they bought an investment property. It was in a growing area with enough land that it could be subdivided.

They didn’t have much else, but to their credit they took action and it has paid off for them. As a result, they now have a property that can be the basis of their retirement. All we need to do know is convert this equity into a retirement income.

The second time was when I got a call from a client that I helped create a plan for three years ago. They had chosen to implement it themselves, which I was ok with as it was relatively straight forward. The hardest part was borrowing to invest in some shares (Exchange Traded Funds actually).

As often happens, life took over and they didn’t get around to doing anything. As a result, they have set themselves back about $200,000.

The third time was a newspaper article I read on Friday afternoon. The American Social Security Fund was setup in the 1930s to help provide for the retirement of the least well off.

Unlike Australia’s Future Fund, it was legislated to only invest in US Government Bonds. Remember this was not long after the Great Depression, so you can understand the Government’s reluctance at the time to take too much risk.

However, the big issue wasn’t with the original plan. It is that in the last 75 years, no US Government has ever taken the time to review whether they should broaden the scope of what the funds could be invested in.

This has had enormous implications.

Since 1971 (that is as far back as their data goes), the fund has had annual average return of 4.8% and it is now worth a staggering $2.7 trillion.

However, during the same time, the US S&P500 (i.e. the index that tracks the top 500 US companies) has had average annual returns of 10.5%. Instead of having $2.7 trillion they could have had more than $15 trillion.

Now, I am not saying all action is good.

Buying units or apartments that are negatively geared and without capital growth is not good. Trying to time the market is always a gamble (no one can ever know when to pick both the top and the bottom).

We specialise in helping professionals and executives grow and protect their wealth so they can live their ideal life. If you would like to discuss how you could benefit from independent financial advice, book a chat via the button below or contact us on 02 6269 3339 or at team@constructwealth.com.au.