Keep Focus On The Future

Sat., March 14, 1998

Chet Currier Associated Press

Though they may describe themselves as long-term investors, many owners of mutual funds spend a great deal of time thinking short-term.

Pursuing objectives that may be several years or even decades away, they often watch the progress of their funds like hawks - tracking daily, weekly and monthly swings in the net asset value and worrying about which way the markets might jump next.

What’s the harm in this? Can’t an investor have a little fun enjoying the excitement of a bull market and watching the progress of a successful investment plan?

Well, of course you can. But as you do that, you need to watch out for the misapprehensions and miscalculations that short-term thinking can bring on, putting you at risk of losing sight of your intended destination.

Among money-management advisers, this problem is known as “myopic risk aversion.” It applies especially to saving for retirement, where the goal is still long-term in many respects even if you are approaching your 65th birthday and expect to stop working next Friday.

In that situation, most people need a financial plan that takes into consideration the very real possibility that they may live another two or three decades.

Or let’s say you have just turned 50 and are all too aware of many signs that you aren’t as young as you used to be. Well, at this “aging” stage of life, your nearest retirement-planning destination still may lie 15 or more years in the future.

“Your time horizon may be longer than you think,” says Founders Asset Management Inc., manager of a Denver fund family, in a new booklet entitled, “Investing For A Fulfilling Retirement.” “Consider not only how long you have until retirement, but also how long your retirement is likely to last.”

Setting your sights accurately this way is important because the prospective risks of all the different categories of investment choices change dramatically with the amount of time you plan to own them.

The point of disciplining yourself to think long-term isn’t to put yourself into head-in-the-sand denial about risk. Rather, it is to force yourself to concentrate only on the risks that apply to you and your investment plan.

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