My child won’t sleep through the night. In the past three and a half years, my wife and I have tried just about everything to achieve a good night sleep, but things keep coming up. First it was that she was a baby, and as I quickly discovered, babies wake up all night long. And then it was that she didn’t want to sleep alone, and then she discovered that she could get out of bed and walk around.

And now although she is very capable of being a “big kid” there are still nights when she will try just about anything to stay up and not have to go to sleep.

My point is this… during these sleepless years, my wife and I have invested a lot of time and effort, and like many parents we have made our share of mistakes, all with one goal in mind, getting a good night sleep. This is how successful investing also works; first you identify a goal and then develop a plan to help you achieve that goal within a certain time frame. Unfortunately, both investing and financial markets are a lot like parenting each with their own pitfalls, disasters, good times and fluctuations. Most investors, like parents, also make their share of mistakes and in order to become successful, they must learn from those mistakes while at the same time remaining focused on the ultimate prize.

The credit crisis of 2008 and the resulting recession of 2009 are a lot like any toddler, simply put, they are volatile. Created by both corporate and individual greed, the lack of disclosure and understanding of the underlying investments of complex products such as asset backed commercial paper and sub prime mortgages; the recession continues to rage on causing the highest unemployment rates in twenty years. As a result, investors have also seen their portfolios dip dramatically reaching a low in the spring before recovering dramatically in the late summer and into the early fall of 2009.

As the recovery continues the American consumer who drove the American economy through their reckless spending habits during the past decade must first repair their balance sheets by turning from spendthrifts to cheapskates. This transformation is already well underway as Americans who saw their savings rates dip below zero a few years ago are now saving in excess of six per cent per year. In turn countries that have had historically high savings rates such as China and Japan must encourage their tightwads to spend more and save less. Global governments must also continue to both retain as well as to create jobs while at the same time exercising monetary restraint.

As we move forward financial markets have rebounded perhaps too quickly spurred on largely due to an increase in government spending, not seen since Roosevelt’s depression era ‘New Deal program’. During this period markets have remained volatile and I’ve also seen my daughter have her good days and bad days. But all is not lost, my mother-in-law always said, “this too shall pass”. Three year olds eventually grow into four year olds, recessions ultimately end and financial markets and personal portfolios eventually recover. The question is how and when will these events happen and like parenting there is no definitive answer. Life however continues my daughter like the economy will grow up, mature, marry, have children of her own and the economic cycle will start anew once again. ¡Así es la vida!