It is very easy to develop a sense of "impending doom" when you turn on the news or read the paper. The apparently endless problems in the Middle East, Japan, our own chronic budgetary problems, and on and on. The parade of maladies, both real and perceived, marches before us and we pull all of this into our sphere of thinking.

The outcome of any of these "crises" rarely has any direct impact on us or our personal goals but we often act is if they do. Our primary objective is to prepare and plan for retirement/financial independence and this simply can't be done if we are cowering in the corner awaiting the next big crisis du jour. Dread can't be made into a good investment policy.

So, what really does matter? In our view, understanding the new longevity and appreciating that even at age 75 or 80 you will still have a long term investment time horizon (because of the need to protect purchasing power). Over a typical retirement time horizon of 25 - 35 years there will be many unexpected events. There always have been. "Once in a lifetime" events happen with some frequency. We don't need to guess when or where the next "bump in the night" might occur but only to understand that it inevitably will. We can't put ourselves into react mode or progress towards our goals will cease. Attached is a chart of the Dalbar Study on investment behavior that is repeated every few years always with the same conclusion - invesments will provide return, but it is up to investors not to let fear stand in the way.

Think back 35 years or so to 1976. A first class stamp was 13 cents, the median home price in the U.S. was around $43,000 (about $202k now) and the S&P 500 was  110-140 depending on exact date (at this writing the S&P 500 is 1330). There were plenty of dark clouds on the 1976 horizon (inflation was heating up, averaging 6% that year and unemployment was over 8%). So were investors who bought equities in the face of these crises rewarded? Of course they were as long as diversification and discipline were practiced.

It is important not to base your investment policy on today's headlines but rather your investment lifetime. You have to remember that most of the news each day has little or nothing to do with you.