Part II: Take a Look Under Your Hood
Good Morning Relaxing Retirement Member,
Last month, in the aftermath of an 11% market correction in 7 business days, we examined the practices of great investors like Warren Buffett and Ron Baron and noted how they’re completely unfazed by market price turbulence.
The biggest reason is that they’re not focused on investing in “the stock market”. They recognize that “the stock market” is nothing other than a medium to buy and sell shares of all the companies in which they own shares.
Instead, they’re focused on the prospects of the companies they own, and those they’re looking to acquire, and their ability to prosper for years to come.
My recommended strategy during that market turbulence was for you to take a look “under your hood” for a minute and examine the companies you own through your funds.
Further, to give some thought to the future prospects for each one of the companies in which you indirectly own shares, i.e. Apple, Microsoft, Exxon Mobil, Johnson & Johnson, Nestle, Novartis, Toyota, etc.
This led to some fantastic feedback from many of our Relaxing Retirement members as you never really focused on the fact that you’re a shareholder (directly or indirectly) in each of these incredibly run companies.
How Many Companies Do You Own?
This also sparked a request from one of our members for us to tally all the companies in which they owned shares through the exchange traded or mutual funds they owned.
As I was sharing the results of my findings with them, I thought it would be a great idea to share the results with you as well.
The dollar amounts, allocation percentages, and weightings vary, but we utilize virtually all of the same exchange traded and mutual funds in each asset category with all of our members to achieve the diversified allocation we recommend in your Retirement Blueprint™.
Through the equity based exchange traded and mutual funds they own (stocks), they own pieces of over 9,300 companies all over the world.
Through the bond based exchange traded and mutual funds they own, they invest in over 4,100 companies and entities (governments and municipalities) all over the world.
Stop and think about those numbers for a moment.
As you’re letting those sink in, here are some thoughts to ponder and focus on:
- The greatest financial risk you face over the course of your life is NOT the volatility in the price of the companies you own (as the financial media has attempted to condition everyone to believe), or the Dow dropping by 1,000 points today.
- The long term value of any given company is NOT dictated by short term, temporary market price movements. Their underlying long term value, and thus their share price and dividends, is driven by their earnings and cash flow.
- Market prices go up and down every day, but our long term goals never change. We all want to maintain and financially support our desired lifestyle for the rest of our lives in the face of ever rising costs to do so.
- Given this goal, the greatest financial risk you face is running out of money because the financial assets you own don’t keep pace with your rising lifestyle costs (inflation).
- To accomplish your main goal, you must own financial assets that give you the best opportunity to generate the rising lifestyle sustaining income you need.
- You are not relying on any one company to financially support your goals. You have intelligently allocated your holdings across thousands of companies in more than a dozen different asset classes.
- Each one of the companies in which you directly or indirectly own shares is managed by very smart people in pursuit of rational business objectives. They’re subject to consistent, objective standards of value: earnings, dividends, and cash flows.
- Each of these companies is an active participant in the deep, diversified, entrepreneurial, innovative, hugely productive, and transparent $18 trillion worldwide economy.
- If you were playing the odds, which I strongly recommend you do at every turn, consider the odds of every one of the 13,000+ entities in which you indirectly own shares permanently disintegrating into thin air. While there are very few guarantees in the world, I think you’ll agree that history has demonstrated that the odds of that occurring are quite remote.
If your confidence wanes on any given day because of financial news reporting, take a look under your hood and feel confident about all the great companies you own as you head into battle each day!
Committed To Your Relaxing Retirement,
The Retirement Coach
P.S.: WHO do you know who could benefit from receiving my Retirement Coach “Strategy of the Week”? Please simply provide their name and email address to us at info@TheRetirementCoach.com. Or they can subscribe at www.TheRetirementCoach.com. I appreciate the trust you place in me. Thank you! (The content of this letter does not constitute a tax opinion. Always consult with a competent tax professional service provider for advice on tax matters specific to your situation.)