Investors get compensated for taking risks. The timing of those risks is always unknown in advance.

These two key investing concepts underlie this month’s articles from contributing editors Craig Israelsen and Paul Merriman. They are also concepts that should be emphasized now since October is National Financial Planning Month. In an age of YOLO (you only live once) attitudes toward money, blocked shipping lanes in the Middle East, rising bond yields and uncertainty around the actual impact of artificial intelligence (AI), focusing on the basics matters.

One of those basics is understanding how your time horizon impacts your decisions. Individual investors with 30 or more years before retirement benefit more from high returns. They have the time horizon to see their compounded returns greatly exceed the value of their savings contributions. This, of course, only happens if they treat investing as a marathon instead of trying to sprint to the finish line on Robinhood or Kalshi.

Individual investors with 20 or fewer years to retirement are better off saving more. Why? Because the cumulative amount of ongoing contributions is nearly equal to the returns realized. This assumes a perfect world where contributions to retirement savings increase steadily and returns are the same every year. Plus, a shorter time horizon offers less time to recover from an ill-timed drop in the market. Israelsen’s article unpacks this concept.

Another investing basic to understand is your ability to tolerate volatility and remain patient. Small-cap value stocks demonstrate why.

Small-cap value has significantly outperformed large caps over the past 100 years. That outperformance has come with more volatile returns and stretches of underperformance. Small-cap value stocks have particularly trailed large-cap stocks over the past 10 years.

To realize the small-cap value premium, an investor needs both the tolerance and the patience to stick with small-cap stocks. Paul Merriman’s article walks you through the considerations of allocating to small-cap value.

Wishing you prosperity and good health,