One of the most dangerous but typically difficult to avoid things is setting your sights on yesterdays high water marks.

Whether it’s investing or planning a career, the common but dangerous thing to do is to look at what worked in the past and aim for the same target in the future.

This tendency commonly shows up both in career planning and investing so let’s examine the typical mistakes that people make in these areas.

It was once common to see sons and daughters of university professors aiming to become university professors. At one point this position was look upon by some in academia as the pinnacle of success. 30 years ago for example a tenured university prof might earn a whopping $65,000 a year with all of the perks included three months off, a full defined benefit pension program and the perceived right to take the high moral ground.

So it’s not unexpected that their offspring of such and educated professional might want to repeat their parents success. Herein lies the trap. Everything changes over time so the aspiring student in this case invests a decade of their time only to find that upon graduation all of the positions have become sessional versus tenured – meaning no pension, no paid time off and no job security. In some cases the coveted PhD actually meant they had overpriced themselves in teaching markets altogether. Education boards have a tendency of choosing freshfaced lesser educated graduates with regular teaching degrees over those with a full Phd due to cost savings.

The moral of the story being that what was once a pinnacle is not always so.

The experience is commonplace in the investing world as well. Consumers typically look exclusively to the investment with the highest ten-year rate of return and then extrapolate the same rate of return going forward. Unfortunately, earning the same return for the next decade rarely comes. Instead look at the fundamentals, demographics and trends to see where things are likely to go.

So give some thought to what you or your family might be aiming for today. Will yesterday’s target be worth the same value down the road?


E. & O.E.

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