In gathering articles and studies to write about for this month’s Briefly Noted columns, I came across one entitled, “Dog Bites Man: Americans Are Shortsighted About Their Finances.” I ended up excluding the commentary, not because it wasn’t good, but rather because there were other commentaries I ultimately decided to go with.

The Center for Retirement Research (CCR) at Boston College’s ‘Dog Bites Man’ study provides a notable contrast with the tone of the articles you will find in this month’s issue. We have several articles discussing how to improve portfolio allocation and the investing process. Two of the articles are on the topic of allocating a portfolio in retirement. Fund manager Guy Spier shares nine pertinent rules from his professional experience that he thinks will help you make better decisions. Jim Cloonan demonstrates the importance of quickly fixing a mistake in his latest Model Shadow Stock Portfolio commentary.

We also have an article showing how large-cap and small-cap stocks have performed in various monetary policy environments. The timing of the article coincides with the March Federal Open Market Committee (FOMC) meeting, which concluded a day before we sent this month’s issue to the printer. As you have probably been reminded many times, the committee removed the language saying that it can be “patient in beginning to normalize the stance of monetary policy” from the meeting statement.

The attention that the FOMC’s wording change received gave support to the aforementioned brief. The CCR found that day-to-day financial concerns have a much more significant impact on financial satisfaction than distant concerns do. Some of this is logical. A person experiencing difficult daily expenses is not going to be very focused on his or her IRA. It’s very hard to save for retirement when one is unemployed or otherwise facing immediate financial problems.

What’s notable about the survey is that even for households considered to be financially stable and able to meet their daily expenses, short-term financial concerns still trump distant concerns. Factors such as health insurance and saving for college have a much larger impact on financial satisfaction than retirement savings.

No one is saying that not saving for college or going without health insurance is a good thing. College and health care are significant expenses that must be planned for. But so is retirement. Whereas undergraduate college is four years (albeit, a very expensive four years, assuming the student graduates on time), retirement can last for 30 or more years. It is a big expense that must be planned for.

Yet talking about activities that maximize long-term wealth and ensure a successful retirement is not what often attracts eyeballs. There is a societal desire to know what’s happening now and what the implications of those events are. Any organization competing for attention knows this and acts accordingly. The financial services industry likes the short-term focus because any commentary that gets clients to transact more is a positive. We trade, they profit.

Investors would be better served if the conversations focused on long-term allocation strategies, withdrawal rates and improving the process of the investing. (You will find articles about all of these topics in this month’s issue). It’s important information, but does not fulfill the desire to know what is happening right now. The more you can fight the tendency to focus on the short term—and all the commentary and data produced about it—the better off you will be.

I’m not advocating that you ignore your short-term financial needs; rather, I’m advocating that you think long-term as well. If you’re vigilant about not letting the short-term tail wag your long-term investing process, you’ll be wealthier, and likely happier, as a result.

Wishing you prosperity,

Charles Rotblut, CFA
Editor, AAII Journal
@CharlesRAAII