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How Teaching my Daughter to Ride Her Bicycle Completely Changed my Perspective on Investing

| August 20, 2019
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How Teaching my Daughter to Ride Her Bicycle Completely Changed my Perspective on Investing

This is a photograph of me with my daughter Deborah about ten years ago starting the MS Bike Tour in New York.  It was one of many rides we completed together, and it began Deborah’s work for charitable causes and public service.  The ride began on the west side of Manhattan and continued around the island for 30 miles -quite a feat for a young girl.

Teaching my daughter how to ride a bicycle was something I will always remember as a dad.  There were plenty of skinned knees and tears, but over time she became better and better.  One day she had a breakthrough that made her into the accomplished rider she is today. 

I ran behind her, and noticed she was shaking her handlebars quite a bit, wobbling the bike.  I could see she was so focused on the what was immediately in front of her, adjusting for every little thing.  I instructed her to look further out and stop concentrating on what was immediately in front of the bicycle.  Instantly, she began riding smoothly.

I learned a lesson that day that changed my perspective on life, and I have applied it to how I invest.  Investors, particularly retirement plan participants, should consider a longer time horizon when rebalancing their investment portfolios.  How many of you make investment decisions on news you hear from day to day? 

In 2014, John Hancock Retirement Plan Services released a study by Burgess Management & Research, Inc. reveling that the average annual return earned by participants invested in the John Hancock Lifestyle portfolios exceeded the average annual return earned by those invested in non-asset allocation investment options by 106 bps (1.06%) over 15 years*. 

The reason for this significant difference is that professional portfolio managers invest with a long-term perspective, and make investment decisions on fundamentals, not the static they hear every day.  I realize the importance of your investment portfolios.  That is why it’s important to diversify! 

John Hancock’s study determined that participants using professionally managed asset allocation options earned better returns because most of them adopted and adhered to their strategy and did not move in and out of the market.  I follow the news, and what I hear is often very alarming.  Many investors seeking to protect their hard-earned savings feel a need to do something, often selling or buying at the wrong time. 

Just remember, making frequent portfolio changes is like over steering a bicycle.  Successful investors build a strategy and stay the course.

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* Source: https://www.johnhancock.com/news/retirement-plan-services/2016/09/study-demonstrates-value-of-john-hancock-asset-allocation-portfolios-for-401-k--plan-participants.html

Asset allocation does not guarantee a profit or protect against loss in declining markets.  There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio or that diversification among asset classes will reduce risk.

 

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