Habits of the Wealthiest People
As you view this post, please take some time to reflect on your habits and rituals and evaluate where you can make improvements. After all, no one is perfect and there is always room for positive change. If you look on the Internet, you will find a mind-numbing amount of advice from self-proclaimed “success experts” (Google it, I dare you). But when you cut through the fluff, most point towards one key piece of advice. Almost all would agree that the single most important thing you have is your time. Invest it wisely. It is the one thing you can never get back no matter what. Invest it evenly in all aspects of your life, not only in your professional goals. Life is about balance, too much of anything can be bad and moderation is key. To me, it is very important to invest time in recharging. Your life and career is a marathon, not a sprint. If you only focus on the short term, you risk burning out too quickly and that puts you at a severe disadvantage. I like to recharge by doing things that I enjoy, both productive and even non-productive things. Spending time with my family and loved ones reminds me what I work hard for, it helps boost my motivation. Here are links to some great sources that can help you build habits to improve your professional and personal life:
12 Things Successful People Do Before Breakfast Steve Jobs Explains the Rules for Success 14 Things Every Succesful Person Has in Common The 7 Habits of Highly Effective People The 48 Laws of Power
Please take time to share some of your habits and beliefs in regards to success, both personal and professional. Original infographic from: Business-Management-Degree.net on Last year, stock and bond returns tumbled after the Federal Reserve hiked interest rates at the fastest speed in 40 years. It was the first time in decades that both asset classes posted negative annual investment returns in tandem. Over four decades, this has happened 2.4% of the time across any 12-month rolling period. To look at how various stock and bond asset allocations have performed over history—and their broader correlations—the above graphic charts their best, worst, and average returns, using data from Vanguard.
How Has Asset Allocation Impacted Returns?
Based on data between 1926 and 2019, the table below looks at the spectrum of market returns of different asset allocations:
We can see that a portfolio made entirely of stocks returned 10.3% on average, the highest across all asset allocations. Of course, this came with wider return variance, hitting an annual low of -43% and a high of 54%.
A traditional 60/40 portfolio—which has lost its luster in recent years as low interest rates have led to lower bond returns—saw an average historical return of 8.8%. As interest rates have climbed in recent years, this may widen its appeal once again as bond returns may rise.
Meanwhile, a 100% bond portfolio averaged 5.3% in annual returns over the period. Bonds typically serve as a hedge against portfolio losses thanks to their typically negative historical correlation to stocks.
A Closer Look at Historical Correlations
To understand how 2022 was an outlier in terms of asset correlations we can look at the graphic below:
The last time stocks and bonds moved together in a negative direction was in 1969. At the time, inflation was accelerating and the Fed was hiking interest rates to cool rising costs. In fact, historically, when inflation surges, stocks and bonds have often moved in similar directions. Underscoring this divergence is real interest rate volatility. When real interest rates are a driving force in the market, as we have seen in the last year, it hurts both stock and bond returns. This is because higher interest rates can reduce the future cash flows of these investments. Adding another layer is the level of risk appetite among investors. When the economic outlook is uncertain and interest rate volatility is high, investors are more likely to take risk off their portfolios and demand higher returns for taking on higher risk. This can push down equity and bond prices. On the other hand, if the economic outlook is positive, investors may be willing to take on more risk, in turn potentially boosting equity prices.
Current Investment Returns in Context
Today, financial markets are seeing sharp swings as the ripple effects of higher interest rates are sinking in. For investors, historical data provides insight on long-term asset allocation trends. Over the last century, cycles of high interest rates have come and gone. Both equity and bond investment returns have been resilient for investors who stay the course.
