Extending Time Horizons Is Critical to Building Wealth

Extending time horizons is critical to building wealth

The basic tenets of building wealth, like having a well-diversified portfolio with long time horizons, are not difficult concepts that are relatively easy to implement. So, why don’t people follow them?

Throughout financial history there have always been Siren songs of “get rich quick” investments tempting investors to ignore their long-term financial plans for immediate gratification, and rush to newer, better, more exciting investments that promise to quickly build wealth. Unfortunately, these ideas end up destroying wealth rather than building it.

Individual investors today seem to be again straying from proven wealth-building strategies and have become significant risk-takers. The beta of individual investors’ portfolios is near a record high of 1.20 suggesting they are punting prudent diversified portfolios to trade individual stocks (See Chart 1 courtesy of BofA Global Investment Strategy).

individual investors beta