The Future Has Always Been Better Than the Past - Rodgers & Associates

The Future Has Always Been Better Than the Past

We believe key person­ality traits to investing well are patience and an even temperament. But above that, investing requires the belief that the future will be better than the present. Fortu­nately, history is on the side of the optimistic investor.

Progress can be measured in many different ways. The increase in life expectancies can be attributed to medical advance­ments over the years. Techno­logical advances have made life more efficient and save us time including the invention of the computer, internet, digital cameras and the iconic combi­nation of all of those, smart­phones; where we can check our email and bank balances while standing in line at the super­market. Progress can also be measured in the amount of leisure time we have, increased freedoms and even changes in how we fight wars or negotiate for peace. Perhaps arguably, I think that in each one of these measures the world today is in a more advanced place than at any time in history.

A simple example is to compare your life to that of your grand­parents, parents, children or grand­children. From one gener­ation to the next, the quality of life has improved by most measures. Recently my 10-year old daughter and I were going through a bin that held pictures from when I was in high school. I heard her ask, “Mom, what is this?”. When I looked to see what she was referring to, she was holding a photo­graphic negative. The concept of the type of photog­raphy I grew up with is completely foreign to her. All she is familiar with is digital photog­raphy.

Of course progress can and often does lead to new problems. Creating solutions to these new problems is the way of the world – and is often done through for-profit enter­prises that trade on public exchanges. Investors then have the oppor­tunity to share in the profits of these companies without being a part of the day-to-day opera­tions. While being an investor can be nerve wracking at times, especially when looked at in the short term, a well-diversified portfolio of stock market indexes has an oft repeated history of recov­ering after a major collapse. As depicted in the chart below, look at the stock market as a whole. You can see over time how the market has grown. Investors must be able to look optimisti­cally beyond the short-term because pessimism often encourages poor, emotional decisions.

S&P 500 graphic