The Time and Money Equation

 By: Ryan P. Johnson CFA, CFP® - Director of Portfolio Management and Research 

While the expression often goes “time is money,” at Buckingham Advisors we believe a more fitting expression would be “money is time.” No one can have more time, and money cannot directly buy happiness, but having more wealth could allow you to focus more of your time on what you enjoy. Money is a tool, not something to be loved or feared in and of itself. We help clients build wealth to spend on positive experiences, for improving their lives and improving the lives of others, allowing more free time, and sparing them from tasks they dread. Some studies have shown that using money on intangibles and experiences can have longer-lasting positive effects than purchasing physical items.

At the end of the day, your spending is paying for someone else’s time. If you buy a house, it goes all the way down to the services and raw materials that made up the concrete foundation. Someone was paid to run a machine to mine rocks, someone else transported the gravel to the concrete producer, and someone else laid the foundation; everyone received money for their time. In this framework, your accumulated wealth can be transformed into your ideal way of spending your time in retirement, be it travelling, volunteering, or spending more time with family.

Speaking of time, it is important to have your money working for you year-in and year-out, night and day. Time in the market is the secret to realizing compound returns. Buckingham Advisors offers full-service investment management so you do not have to spend your time worrying about stock research, what the next move from the Fed might be, or where the economy is in the economic cycle. In the current environment of ultra-low interest rates and receiving little compensation for taking credit risk, investors may feel forced into stocks or riskier investments. Even though the return prospects seem low, we still advocate for a portion of assets being invested in bonds, subject to your individual circumstances. This allocation to bonds will serve to fund any cash needs in the next several years so that you do not have to sell stocks if they are down.

Time is very important when it comes to our investment recommendations. A key factor in determining our customized approach is the time until money is needed for your goals, not your age. The range of historic stock market returns narrows as time horizons lengthen. For example, over the past 30 years, the 1-year return of the S&P 500 has ranged from -38% to +34%, but the annualized rolling 10-year returns have ranged from -3% to +20%. The more time you have to reach your goals, the greater your ability to take risk could be. This is important to remember even during retirement, which could last 30 years or more.