Come 2031, today’s sharemarket woes will just be a footnote in your investment history, writes The Motley Fool. From an investment point of view, 2011 has been a rough ride. The eurozone crisis has worn out its welcome. Can it stop now, please? I’m also tired of worrying about the US deficit, China’s property bubble and a possible UK double dip recession. But I’ve just had a revelation that puts this year’s troubles into perspective. 2011 ain’t such a big deal after all. Not for me, and probably not for you either. In the longer run, it will be…
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Come 2031, today’s sharemarket woes will just be a footnote in your investment history, writes The Motley Fool.
From an investment point of view, 2011 has been a rough ride.
The eurozone crisis has worn out its welcome. Can it stop now, please? I’m also tired of worrying about the US deficit, China’s property bubble and a possible UK double dip recession.
But I’ve just had a revelation that puts this year’s troubles into perspective. 2011 ain’t such a big deal after all. Not for me, and probably not for you either. In the longer run, it will be just a footnote in your investment history.
In fact, I’m not going to worry too much about 2012 either. Or 2013 for that matter.
Only one year matters to me. 2031.
When I’m 65. Or maybe 67…
2031 sounds like a date from a sci-fi movie, but it has a more prosaic meaning for me. That’s the year I turn 65. It has been my projected retirement date ever since I started working in 1988. It seemed a distant prospect, then. Now I’m more than halfway there. Just 20 years to go… or maybe 23 years, as the retirement age will probably have been hiked to 67 by then.
Anyway, 2031 is my target date. That makes it by far the most important year in my investment calendar. Because that’s when I will turn my investments into retirement income.
So what’s your target date?
The answer should have a major impact on what you are investing in now. If it is just three years away, you will be investing very differently than if it was 30 years off.
Too many of us are worried about what stock markets will do tomorrow, rather than five, 10, 15 or 20 years down the line.
Former UK Prime Minister Harold MacMillan famously said that the worst thing about politics is “Events, dear boy, events”, but if you’re investing for a decade or two, current events don’t matter quite as much.
In fact, you can even turn them to your advantage, say, by picking up a good, solid company that’s been hit by some temporary bad news – a company such as Cochlear (ASX: COH) which has seen its share price whacked by a product recall.
This Australian success story is a leading supplier of hearing implants. As the global population ages and becomes wealthier, there will be plenty of demand for these devices in the years ahead.
Cochlear is a company you can plan to hold onto for a long time. Other examples are Woolworths Limited (ASX: WOW) and QBE Insurance (ASX: QBE), two other cut-price stocks trading well off their highs.
You can take the same long-sighted approach to a short-term stock market crash, swooping with confidence because markets have a decade or so to get back on their feet.
Human beings aren’t great at looking far into the future. Just look at how the green lobby has struggled to sustain our interest in the dramatic prospect of the planet overheating.
Apocalypse today – that’s something to worry about. Apocalypse tomorrow? It can wait.
So it isn’t easy to work out where we will be in 2031, or whenever, and plan accordingly. But you really should give it a go.
The far side
Portfolio allocation is something you should look at. You probably don’t need me to tell you that you can afford to take more risks when time is on your side, but should be playing it safe when time is running out.
You might also want to try spotting long-term investment trends. This isn’t easy, although it is arguably easier than spotting short-term movements.
There is plenty I don’t know about 2031. I don’t know whether we will all be zooming around on hover boards. I don’t know whether we will be communicating to our computers using a silicon chip embedded in our earlobes.
But I think there is a good chance emerging markets such as China and India will be more established than they are today, to the joy of investors who got in early.
At some point, I suspect we will look back with wonder at how cheap banking share prices were in 2011, or hanker for the days before the oil price hit $200.
I know something else. Thanks to rising longevity, the state will face an even greater struggle to fund affordable pensions over the coming years. That mean we will need to make ever greater provision ourselves.
If we don’t, we will find our retirement date getting pushed ever further backwards. Then it will be forget 2031, it’s 2035 that matters. Or 2036, 2037…
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A version of this article, written by Harvey Jones, first appeared on fool.co.uk . It has been updated by Scott Phillips. Scott owns shares in Woolworths and QBE. The Motley Fool’s purpose is to educate, amuse and enrich investors, and our disclosure policy loves the long term. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.