Contemporary business theory places great amounts of emphasis on strategy and long-term thinking.  These concepts are most definitely of great importance, but there is one critical aspect of successful long-term strategy that many theories and systems fail to comprehend.  That critical insight is how all strategies, regardless of how large or small ultimately distill down to steps that must be acted upon in the present tense.  Furthermore, these action steps frequently break down into smaller steps.

Thus, it becomes true that the largest, most grand, and most complex strategies all come down to one small step.  That one step is the next step.  Once the next step has been taken, focus shifts tot he step after that, and the step after that, and the step after that.  The long-term perspective must always yield to the immediate action, because long-term results can only be accomplished through a continuous string of actions.

Another way of considering this concept is to understand the relationship between past, present, and future . . . both in regards to thought and action.  The past is beyond our ability to influence, but its insights are ours to discover.  Yesterdays victories cannot be relied upon to sustain us into the future, and yesterdays failures have passed into history.  We cannot exist in the past, because the past is gone.  The present is where we recognize current opportunities and act to capture them.  The knowledge of the past can help us to see opportunities, but they must all be captured in the present.

The present represents both the past of our future and the future of our past.  Todays opportunities will be gone tomorrow, and tomorrow’s opportunities cannot be captured today.  As we look into the future, we see the present that has not yet come to past.  None of us can act in the future until the future becomes the present.  The opportunities of the future are valuable to understand, as they will pass into the present tense over due time.

We must be mindful of the future, but we cannot live in the future.  The future is most certainly inevitable, but all that we do must take place in the present.  Furthermore, it is not practical to indefinitely delay all enjoyment of life for the sake of the future.  Life is for living, and each person must balance the present against the future, without being weighed down by the past.  We must understand that the future can only be built by decisions and actions that we take in the present.  Thus, what we do now is ultimately what is of the greatest importance, since the future necessarily build on the present.

In this way, we realize success by taking one small step . . . our next step.  The steps that we take are shaped by our vision of the future, and our recognition of opportunity.  However, the only way that we can turn this into reality is by taking action in the present.  Each of us has the distinct opportunity to shape our lives by taking action right now.  Success is not a multi-thousand step process, it is a one step process . . . your next step.  By consistently taking action on your next step toward success, it will keep you perpetually moving toward greater and greater achievements.  Each of us can increase the influence that we wield over our lives by taking action right now on one small step toward success.

In the end, achieving our ambitions is both more complex and more simple than most people realize.  The complexity arises from prioritizing between all the things that we wish to achieve and all the decisions that we must make.  The simplicity comes from the fact that all achievements result from individual actions.  And we can achieve our goals by isolating and prioritizing the individual actions that need to be taken.  Thus, one small step … followed by another and then another is the way that we gradually build the stairway to our goals and ambitions.

 

It’s very easy to critique someone else’s page once it’s complete. It’s quite another thing to start from the beginning and develop a page from scratch.

For some reason, we quickly find ourselves with a busy, confusing page, the kind of page that is exactly the opposite of what we set out to create.

The problem is that we start in the wrong context.

The Landing Page Isn’t Part of Our Site

At its purest, a landing page stands by itself, eager to serve a very specific visitor. It is not found in our sitemap. It is not included in our main navigation.

Yet, we tend to start with the template from our corporate website or e-commerce site when we build a landing page. This template comes with some significant baggage:

• It has its own color scheme. This means that a landing page built on this template may have a different color scheme than a display ad that is driving traffic to the page.
• It has the company’s logo and tag line. There are situations in which this is helpful on a landing page, and there are many more in which it can be harmful.
• It has the main site’s navigation bar and side navigation. These are opportunities for visitors to “leak” away to the site, never to return to the landing page.
• It may have a static right sidebar. This is a source of more “leaks.” These also create one very important conversion killer: choice.

Basically, before we’ve created the first line of copy or our first form field, we’ve got a disconnected, leaky landing page.

What if we started with a Tabula Rasa, a blank slate, and built from there? Would we come up with a significantly different page?

I think so.

The Primal Landing Page

The landing page in Figure 1 is the perfect landing page; simple, clear, no confusion.

Figure 1: The perfect landing page for a very limited audience.

Unfortunately, this page will only be effective if you’re selling to a very curious crowd or are selling dominatrix services, where to “Submit” makes sense. For other markets, we’ll have to make the call to action more relevant.

Landing Page Relevance

Relevance has a very different meaning for a landing page. While you may think that information about your company and products is relevant for your website, it is the source of the visitors that defines relevance for a landing page.

Your company is just an actor on the landing page’s stage.

Landing pages, like ads, start with a great offer. Let’s pretend we’re the U.S. Mint selling dollars at a discount. If our traffic is coming from a search ad, for example, our call to action must match the promise in the ad. Figure 2 shows an example of a landing page and two ads that may drive traffic to it. Can you see how the offer on the landing page is a let-down for a visitor coming from ad B?

These visitors expect to see “50% off.” The landing page offer is too general for ad B, but may work well for ad A.

Figure 2: The landing page offer is relevant to ad A, and less relevant to ad B.

We can further improve this by telling the visitor exactly what they should do. “Click here” is all they can do right now.

Figure 3: Adding “Click Here” makes our call to action even more specific and effective.

Invite a Designer In

Our button is getting a little unwieldy. Now is a good time to ask a designer to help us out. Don’t ask them to design your page, though. Remember, this is a backwards landing page. A designer might offer the layout in Figure 4 to solve our button problem.

Figure 4: Design is important in helping to communicate. We are not worried about “Look and Feel” at this point.

This is an improvement, but the Mint isn’t going to sell many dollar bills with this landing page. We need a way to take payments.

Ask Only for Necessary Information

We can expand our form a bit to let users enter a credit card number. This makes our landing page eminently more helpful. However, each field we add is likely to reduce our conversion rate. Unfortunately, we must ask for quite a bit of personal information to charge the credit card. We should only add those that we absolutely need.

Figure 5: Every field you add to a form can be expected to reduce a page’s conversion rate.

Now that we’ve added several fields to your page, our conversion rates are going to drop, especially since we’re asking for very personal information. To counter this, we need to give the visitor more reasons to complete the form.

Invite a Copywriter In

Don’t write your own copy. Copywriters are good at using words to persuade visitors to take action.

In this case, I’m writing the copy as an example, and I deem a few bullets to be sufficient, since this is such an awesome offer.

Figure 6: Adding persuasive copy will counter some of the anxiety the visitor has about providing personal information.

Persuasion only goes so far. We also need to build trust on our pages.

Building Trust With Symbols

Our copy can talk about how trustworthy we are, but we need some symbols of our trustworthiness. Good examples of trust symbols include:

• Your company logo, if it is recognizable by visitors.
• Trust symbols from third-party auditors like the Better Business Bureau, eTrust, VeriSign, Hacker Safe, and others.
• Your customers’ logos.
• Images that indicate encryption, typically a lock icon.
• Credit card logos.

In this case, the Mint is well known and is a governmental organization. Who can we trust more than the government? We’ll add its logo.

The Mint also has some very well-known customers. This offers social proof to the visitor. As you will see in Figure 7, we also build social proof with a fourth bullet in the copy.

Figure 7: Adding trust symbols makes our visitors feel safer about completing a transaction.

We want some of these symbols close to our button, so we add the credit card logos near the point of action.

Show the Product

An image on the page helps anchor the eye. However, the image must be relevant. Always show the product. Even if your landing page is offering a service, find a way to show off the service as a product.

The higher the quality of the image, the better it will perform. Don’t skimp on photography, as I do in Figure 8.

Figure 8: Show the product on your landing pages.

Our page is getting a little crowded and our call to action is getting lost.

Make the Call to Action Prominent

The problem with all of these trust symbols and pictures is that they compete with our call to action. Our little gray “Click Here” button isn’t making it clear to the visitor what they are expected to do.

We’ll consult our designer again. The designer should recommend screening back some of the high-contrast logos and making the call-to-action button draw the eye.

Figure 9: The call to action should be the most prominent item on the page. Screen back competing images if necessary.

Since the button is now very prominent, we asked our copywriter to make it more specific and enticing.

At this point, we have all the elements of a high-converting landing page.

And we did it backwards.

At this point, it’s important to guard against “forward” thinking as we ask our designer to make the page easier to scan and read.

Taming the Designer

Ideally, we would launch this page and get our baseline conversion rate. Then, we can begin split testing to make it more and more effective.

However, a competent designer can make this page easier to read with some color and white space. The designer can position things on the page to induce scrolling. They can format the page to fit the common screen sizes.

If your designer starts talking about adding headers, icons, columns, progressive forms, or anything else that doesn’t solve a problem related to conversion rates, tell them “We’ll add that idea to our test schedule.”

Now launch the landing page and watch the analytics. You did add analytics, didn’t you?

Instead of starting with a template, start your landing page from the call to action and build it backwards. This will avoid the introduction of elements that reduce your conversion rates unnecessarily.

Article source: ClickZ

 

The current economic and political environment is one that has become increasingly polarized.  News continues to come in about a building US government debt spiral that is running a very real risk of destroying the international prominence of US dollars in the global marketplace.  There are serious problems on the horizon if large efforts are not made soon.

In response to this situation, people react predictably according to their political persuasion.  Those of a left-leaning persuasion exhibit a noted tendency to blame all economic problems on President Bush, high-income earners, and foreign military operations.  Similarly, those of a right-leaning persuasion are more likely to blame President Obama, and government spending.  However, there is a key principal that people on both sides frequently miss.

For the sake of argument, let’s say that all of the nation’s problems are the responsibility of George Bush / Barack Obama.  (Pick whichever name makes you feel more vindicated)  Now that we have “proven” who is responsible for all of the country’s problems, what are you going to do next?  In response to this question, most people will trail off into some manner of semi-coherent mumbling about fiscal policy, national priorities, or some other form of rehearsed phrases.  Moreover, this narrative completely misses the point of the question.  Most people get so wrapped up in what they think other people should do, that they completely lose focus on what they should be doing.

Thus, the important question for people to ask themselves is not whose fault the problems are, or even what the government is going to do about it.  The wheels turning those cogs will continue to spin with or without our constant attention.  The prescient question for each person to ask themselves is what they are doing for their own future and that of their family.  What decisions will you make right now that create a future of happiness and prosperity?  What sacrifices are you willing to make now for the sake of your future?  Are you prepared to rely on yourself when cuts to government services become unavoidable?

The answer to this question will frame the future of your personal, professional, and financial life.  The difference between informed achievers and self-indulgent whiners is the propensity to take action.  What action are you going to take today?  Are you going to start a business to create an additional stream of income?  Are you going to build an investment portfolio to gain greater control over your financial future?  The exact decision that you make is less important than making a decision and taking action.

In the end, each person is ultimately responsible for the well being of themselves and their family.  The government has made more promises than can possibly be financed, so dramatic changes of one stripe or another are inevitable.  That’s not politics, its math.  Smart players in the game of life will focus on the decisions that enable them to gain greater control over their personal, professional, and financial life.  The unfortunate truth is that there are many undesirable things in the world that we have no ability to control.  Excessively worrying about them only serves to distract our attention away from the actions and decisions that bring us closer to control over our own future. It is certainly worthwhile to stay up to date on the events of the day, but study them from the perspective of a person who takes thoughtful action.  This will train your mind to see opportunity so that it can be captured with intelligent action.

 

Most people are aware of great deals and tremendous opportunities that people they know have seen or experienced throughout their lifetime.  All of these phenomenal deals share one key characteristic in common . . . somebody took action so that the opportunity could be turned into reality.  This willingness to act is what separates great achievers from the average person.

Conversely, a psychological paralysis grips many people and freezes them into stalling, waiting, and preparing until the opportunity to act has passed.  At this point, many people will begin to create justifications for their decision to avoid action.  This gives us a sense of satisfaction since we avoided what could have been a big mistake.  However, we also avoided what could have been a great opportunity.

The critical skill that high achievers develop is an ability to quickly determine which deals have the highest probability of success, and then to take action on those opportunities that are favorable.  This sounds simple, but it is surprisingly difficult to carry out in the world of reality.  Most of us gather information, get ready to act, then stall . . . and stall some more until the opportunity has passed.

The curious thing about taking action to create success is that it is not a one-time deal.  Most people who achieve high levels of success did not do so because of one single decision.  By and large, success is the result of consistently making wise decisions and taking action over an extended period of time.  It is likely that the benefits of your decisions will compound to produce greater results, but the important part is to start the ball of achievement rolling.

The other side of this insight is that we should avoid looking for the ‘one big deal’ that will make so much money that we never need to work again.  Those deals certainly exist, but they are very rare.  A much more consistent strategy for achievement is to start taking action now and remain open to opportunity as you move forward.  Always keep your future vision in sight, but focus on the next step that you will be taking now.

In the end, Aesop’s words will unfortunately ring true for most people.  However, they do not need to be a description of your life.  By finding opportunity, making wise decisions, and taking action you can consistently build achievements until a temple of success has been constructed for you and your posterity.

 

Many people spend considerable amounts of time following the news of the day, and subsequently become angry over the state of world affairs.  Most people who see problems around them are infused with a natural desire to resolve them.  Ironically, this desire to solve problems is a constant thread across both left-leaning and right-leaning people.

To many of the left-leaning persuasion, daily news brings a perpetual onslaught of human suffering that is being allowed to go unchecked and unchanged by society.  Their desire is for somebody to do something to ease this suffering.  Generally speaking, people of this persuasion would prefer to see government step into action.  The persistence of suffering is seen as justification for higher taxes and more concentration of power in the hands of government.

To many of the right-leaning persuasion, daily news brings a perpetual onslaught of government failure, corruption, and excessive power that has been allowed to continue across multiple generations.  They see the erosion of freedom from government regulations, and confiscation of resources through taxation for the purpose of empowering politicians in the name of addressing social ills that never seem to be solved.  Generally speaking, people of this persuasion would prefer to see a less active government, and an increase in free market forces.  The continued failure of government programs to achieve their goals is seen as justification for reducing the size and scope of government activity.

The unfortunate fact that people of both persuasions must ultimately come to grips with is that we do not always live in the world of how things should be . . . we live in the world of what “is”.  Put another way, there are many forces beyond our ability to individually control that shape and influence the world around us.  It is most certainly true that sometimes events will unfold in a way that is more favorable to people on the left, or the right, but it is always true that neither persuasion is every going to be fully satisfied with the tenor of local, national, or wold events.

In many cases, people allow themselves to become bitter and angry because of what feels like a persistent failure of world events to transpire in a manner that they feel is just.  In some cases this phenomenon manifests itself as an “Angry Liberal” or an “Angry Conservative”, but in almost all cases it involves people who are continually upset about a set of circumstances that they cannot control.  In this way, each successive piece of news or information that we consume becomes another piece of evidence showing how little influence we have over the world around us.

In response to this, we recommend shifting focus toward the things in life that we can control.  Put another way, we recommend to live in the world of “is” instead of the world of how things should be.  Instead of focusing on all the problems in the world, focus on what you can do to create something beneficial.  Instead of studying the news as a means of demonstrating that your anger at the world’s political leaders is justified, seek to find information that will help you take action in a way that benefits your family or those in need.

If you are concerned about human suffering, stop complaining about how the government isn’t doing enough and go do something yourself.  Volunteer for an agency who helps people in need, or donate to a charitable foundation.  if you are concerned about the pervasiveness of government, stop complaining and do something to secure the financial future of your family.  Start a small business that generates supplemental income and generates legitimate tax write-offs.  Study investments to determine which ones will provide optimal returns with reasonable risk in a tax favorable manner.

In short, living in the world of “is” really comes down to taking action.  It is not difficult find problems, or to complain about them.  It is considerably harder to actually do something about some of these problems.  However, it is considerably more rewarding as well.  This is not to say that nobody should advocate for changes to government institutions . . . on the contrary, civic participation is a key tenant of continued national prosperity.  What it means is that your future should be built on your own actions, not the actions of people in political office.

In the end, each of us is ultimately responsible for creating our own life.  To many people, this statement seems self-evident, but it is important to ensure that actions match our understanding.  There is nothing wrong with remaining hopeful for progress in the political realm, but there is power in the understanding that we direct our own destiny.  Each new day is a new opportunity to take action.  Make sure that something new is achieved with each passing day, and the future will brighten in a very fast, very profound manner.

 

The world that we live in is not short on information.  In fact, the preponderance of information that we are constantly bombarded with can create a state of constant confusion that scares us into inaction.  In the martial arts, this phenomenon is referred to as the “chattering monkey mind.”  The key to success lies in filtering down to the useful information and then decisively taking action.

This is especially important to remember since the preponderance of success and financial literature revolves around ‘systems’ and ‘strategy.’  This is especially true if you have ever suffered from insomnia and run across an ‘infomercial’ on late-night television that advertises a ‘risk free’ system to make profits with ‘no money down.’  It can certainly be fun to laugh at some of these marketing gimmicks, but even the best strategy in the world is completely useless unless you are willing to act.

Action involves incurring the risk of failure and criticism from friends & family.  The factor that most financial books and infomercial systems tend to under-emphasize is the important of taking the leap.  The hitch is that the action must be guided by intelligent thought.  Thought without action produces no results, because the strategies are never implemented.  Action without thought is effectively the same as gambling, and only works if you are in exactly the right place at exactly the right time with exactly the right system . . . and even then it may not work the next time you try it.

The proverbial ‘key’ lies in being what Bill Fitzpatrick refers to as a “Thinking person of action” . . . namely, somebody that thinks actively, absorbs information quickly, and acts decisively when the opportunity presents itself.  In order to achieve this kind of co-existence between thought and action, it requires that your mind be constantly trained on thoughts of opportunities so that it is always ready to act.

 

One of the characteristics of humanity that never seems to change is that we are concerned.  Concerned about the economy, concerned about unemployment, concerned about global warming, concerned about global cooling, concerned about foreign wars, concerned that kids are growing up too fast, and concerned that kids aren’t growing up fast enough.  In some cases, people grow so concerned about the state of the world that they require therapy or medication.

The implicit problem with carrying so much concern around with us is the fact that many of the large problems that people spend so much of their lives worrying about are completely out of their control or ability to influence.  The principal reason why so many people expend such effort gathering information and worrying about things beyond their control is because it bestows a sense of self-importance.  In a way, it makes us feel like “Manager of the Universe”.  We imagine this self-appointed post to be that of an informed and concerned person who knows about all of the world’s concerns and is actively thinking about ways to solve them.

The truth is frequently removed from our perceptions by quite a bit.  The only touch point that most people will have with the “big problems” of the world is the infrequent elections where they cast a ballot.  And in the overwhelming majority of cases, the overwhelming majority of the electorate will mark an “R” or a “D” just like they did in the last election, regardless of the world’s surrounding circumstances.  (Please note that this is not attempting to diminish the importance of voting, but rather to highlight the importance of direct personal action, instead of worrying about what is beyond your control)  In most cases, the best remedy for a self-appointed “Manager of the Universe” is to get over yourself.  The world doesn’t change because you’re worried.

Bearing this in mind, it is important to understand that the world DOES change if you take action.  Under this paradigm of thought, the things that we pay attention to derive their importance by the extent to which they enable, inform, or inspire action.  In general, our attention goes to one of three comprehension levels.  Awareness, Concern, or Active Engagement.

Three Levels of Comprehension

• Awareness:

  • This represents things that we know about, but are not able to influence and do not continually worry about.  Most of what people think of in regards to being an informed citizen exists in the realm of awareness.  It is most certainly important to be aware of our community, nation, and world at large but far too many people spend countless hours becoming aware of things that will not influence any direct action.  The most important things to be aware of are those that will influence present and future decisions.

• Concern:

  • This represents the things that are on our mind.  The things that we are thinking or worrying about.  The critical juncture with the thoughts of concern is whether we spend our concern on things that we can act on, or whether we spend all of our time in worry about things that are beyond our ability to influence.  Excessive worry about the world at large produces two unproductive results.  The first is that it occupies time that could otherwise be spend in productive pursuits.  The second is that it creates a feeling of powerlessness since all of these things we worry about are beyond our ability to change.  For optimal productivity (and sanity), focus your concern on the things that you have the power to change.  For most people, this will be decisions about their persona, professional, and financial life.

• Active Engagement:

  • The last and highest level of attention comprehension is active engagement.  This is where you are personally doing something to accomplish your goals or address your concerns.  The reason why it is highlighted so prominently is because all of the improvements in our life (or the world for that matter) stem from a decision to take action.  If you are unsatisfied with your financial position, begin taking action to improve it by reducing expenses and looking for new opportunities to earn and invest.  if you feel sorrow for hungry children, go out and help to feed those hungry children.  In addition to being tremendously more productive that awareness or concern, active engagement helps to create a sense of power and control over your life.  Instead of focusing on what is bad and out of your control, focus on what you can do to make things better for your family and the community at large.

In the end, each of us must fight the urge to declare ourselves “Manager of the Universe” and take action to improve our lives.  When pursuing or consuming information, always ask whether this information will influence or change any future decisions in your personal, professional, or financial life.  Every time that the answer to this question is negative, it pushes life a little further out of your control.  Every time that the answer is yes, it brings life a little further within your ability to influence.  The way that we can change our lives (for real) is by perpetually taking action and learning to make better decisions.  In this way, it is much more important (for both you and the world) to become master of yourself instead of aspiring to be manager of the universe.

 

In the tenacity of life and living, there is a constant interplay between efficiency and effectiveness.  These traits are demonstrated by the metaphors of a clock and a compass.  Efficiency is the art of conducting current activities more quickly.  The pursuit of efficiency inevitably results in ‘working against the clock.’  On the other hand, the pursuit of effectiveness is more concerned with ensuring that the endeavor is moving in the direction of its goal.

The next level of this interplay is determining when to pursue efficiency, when to pursue effectiveness, and in what order to prioritize these initiatives.  When engaging in this thought experiment it is very important to avoid the natural human tendency to believe that one answer is ‘right’ and the other answer is ‘wrong.’  Creative understanding requires that seemingly opposing principles be considered in parallel to one another so that the virtues and shortcomings of each can be rationally examined.

The pursuit of efficiency while ignoring effectiveness will inevitably result in doing stupid things at a very high rate of speed.  Unfortunately, this situation frequently plays out in many political arenas as the ‘pet projects’ of a so-called leader are pushed on the organization.  Another extreme to avoid is the pursuit of effectiveness, in absence of efficiency.  This situation lends itself to endless discussion and hashing over ‘mission statements’ and ‘company values’ without driving any real action.  Many of us are ruefully aware of the self-important bloviating of business leaders and politicians about strategy and vision, with no real impetus for action within the imagined leader or the reluctant followers.

On balance, the clock and compass are both necessary components of success.  The direction provided by the compass must necessarily come first to establish the vision and strategy.  At this point, the efficiency of the clock must be brought to bear so that action is taken to turn the strategy into reality.  As time goes on, efforts must necessarily oscillate between the compass and the clock so that strategy never becomes stale and action never becomes absent.

 

When life becomes difficult, it can become very easy to believe that we are the victims of circumstance.  It is comforting to blame the economy, or whichever political party happens to be in power.  (Ironically, the political party in power typically blames the people that were in power beforehand as a way to try and absolve themselves of responsibility)

However, as individuals there is only a narrow scope of things that we can really control.  I do not have the ability to directly influence the political system since my one vote is easily dissipated.  Thus, the only area of my life that I can ‘really’ influence is what I choose to do and how I choose to react to my environment.

The importance of this insight lies in the fact that many people do not actively choose how they will act . . . instead, they react to their environment emotionally.  Therefore, in a very real way their environment shapes them instead of them shaping their environment.  Conversely, if we wish to exercise influence over our circumstances it requires that each action be a conscious choice.  James Allen described this phenomenon in his book: “As A Man Thinketh.”

The composition of the human mind is such that the thoughts we hold in our mind will manifest themselves in action by means of influencing our perceptions.  When our minds are fixed on blame and failure, then all that we will see is failure.  This focus on failure will naturally result in actions that take us in the direction of our thoughts.  When we consciously fix our minds on thoughts of improvement and achievement, we will remain open to opportunities.  Once we become open to opportunity, they seem to live everywhere that we look.

In the end, it is our thoughts that determine what we perceive.  This perception influences our actions and slowly molds the composition of our character.  Thus, it is figuratively and literally true that we are who we choose to be.

 

Source: Standard & Poors

Most people are very familiar with the traditional investing axiom of ‘buying low’ and ‘selling high’ that is rooted in experience with the stock market.  Because of this, many equity market investors choose to hold their capital on the sidelines waiting for prices to hit a cyclical bottom before buying-in.  We understand this sentiment in regards to stock market investments, due to the increasing volatility of market values in recent years.  The orthodoxy of ‘buy and hold’ worked very well for stocks through the 1990’s, but has subjected investors to large downside risk in the last decade if they bought at the wrong time.

Source: Standard & Poors

The stock market movements of the last fifteen years are a testament to the growing volatility and flattening long-term rate of appreciation for the stock market.  The compounded growth rate for the S&P 500 over the last 20 years look much more modest than most financial planning models assume after the effect of two market bubbles are backed-out.  This leaves us with the inescapable conclusion that success in the current stock market is achieved by the strategic buying of stocks when their values are depressed and systematic liquidation when values expand.

By graphing the index value, earnings per share, and dividends per share of the S&P 500 index over the past 20 years, it becomes quite apparent that the major source of returns after backing out the two market bubbles has been dividends.  Another thing that becomes quite apparent when comparing the stock market against its fundamentals is that market values are much more volatile than the underlying data that is the ultimate basis of market valuations.  These gyrations in market prices have prompted many investors to diminish the importance of fundamentals and cash flow in favor of trying to pick stocks that are about to go up in value.

Unfortunately, experience with financial assets like stocks and bonds have caused many investors to treat income properties similar to stocks or bonds.  The unique aspect of income property is the cash flow generated by rent income.  Since the returns from income property are not solely dependent on gyrations in market prices, there is a much greater cost associated with waiting for the perfect buying opportunity.  The reason for this is because waiting for conditions to be perfect for buying could cause us to miss out on profits from cash flows on deals that we didn’t execute because we were waiting for something better.

Analyzing the cost of waiting shows that every year you delay taking action increases the effective rate of return that is required to achieve the same-compounded results as if action had been taken earlier.  For example, if you can earn a 15% compounded rate of return today and wait for 2 years, you would need a 16.2% rate of return to be in the same place after 30 years.  If you decide to wait for five years, the required return increases to 18.3%.  After ten years, it increases to 23.3% and after 15 years, it stands at 32.3%.

As we can plainly see, waiting too long requires that we earn impossibly high rates of return simply to match the compounded impact of starting today and growing our wealth steadily.  This is where the true power of prudent income property investing comes into play.  Since much of the value comes from cash flow, which is much more stable than market values, returns are less dependent on buying right before the market rockets up and more dependent on finding deals that are attractively priced relative to their cash flow.

Many people in the ‘baby boom’ generation are in the midst of this problem.  They waited too long before beginning to plan for retirement, and had much of their wealth wiped away in the financial crisis of 2008 and subsequent economic recession.  For many of these people, their previous vision of retirement is no longer a reality.  It is not possible for them to earn enough to retire comfortably before reaching what was previously thought to be ‘retirement age’ . . . this will ultimately mean that they must work much longer than they had previously imagined would be necessary.  It is frequently commented; “luck favors the prepared” . . . it is equally true that “luck favors those who take action.”  By taking decisive action, it allows us to harness the power of compounding and create a bright future for ourselves and the people we care about.

Action Item:  Do not wait to begin investing.  Once you have access to the necessary capital and have become sufficiently educated to make an informed decision, take action!!!  When your investments begin to bear fruit, continue to take action by re-investing your profits until a holistic wealth portfolio has been constructed.