August 31, 2016

Investing in Experiences

A few weeks ago my wife and I were fortunate enough to have the opportunity to sneak away to San Diego for a little vacation. It was wonderful. The perfect weather, the beautiful sunset cliffs, the carne asada fries… There simply aren’t words! Strictly financially speaking, we have absolutely nothing to show for it except for a few souvenirs and some credit card bills I’ve already eradicated, but the joy of the experience and the value of the memories made are definitely worth something.

I’m still relatively young, but I’ve got three decades under my belt, and that’s enough experience in this crazy game called life to have learned a few things. One of my biggest realizations is just how much more valuable an experience, like a trip, can be than most possessions.

Greek philosopher Democritus once said “Happiness resides not in possessions, and not in gold, happiness dwells in the soul." American novelist Nathaniel Hawthorne echoed the same sentiment a little more bluntly when he said “that a man's soul may be buried and perish under a dung-heap, or in a furrow field, just as well as under a pile of money." I couldn’t agree more and I think we should all pay close attention to Democritus and Nathaniel Hawthorne’s words.

The beauty of investing in experiences is you get so much more than you do with most purchases that are going to become obsolete, break, or become forgotten. Take our trip to San Diego for example. I got hours of enjoyment designing a trip where we could see as much of the city in a few days as we could as cost efficiently as possible. I got to anticipate potential itineraries in my head, altering them to make them as magical as I could. Once booked, my wife and I got to look forward to the trip for a couple of months. Once on the trip we got to savor the experiences themselves, and as the “travel agent,” I got the added satisfaction of seeing my wife enjoy the trip I had planned just as a chef enjoys watching someone clean their plate with a smile on their face. It’s only been a few weeks, but there have already been times where something has triggered a memory of San Diego and I’ve been able to smile and remember moments just to myself, share my thoughts with my wife, or compare adventures with others who have also visited that awesome city. How many physical possessions can you think of that bring that much joy?

A story I have shared with many people, and one of the saddest days of my career to this point, was the day when an elderly and somewhat miserly man emotionally asked me what the point was of all of his wealth. By all accounts this man had been blessed with a relatively happy life, but I have no doubt his life could have been fuller and his soul happier if he’d invested in a few less stocks and bonds and a few more experiences with his now deceased wife, now dwindling number of living friends, and now adult children.

I do have a few prized possessions, but it’s not my iPhone, my computer, or my television. Some of my most valuable possessions are certain pictures of my grandparents, my beloved Braves and Georgia Redcoat hats, a coffee mug, a train whistle, a baseball glove, a high school annual, a watch, a pocket knife, and some trip souvenirs. Isn’t it ironic that most of those items are the physical remnants of treasured experiences and memories that I am constantly trying to stoke so that they will continue to burn brightly in my head?

You need to have food, clothes, shelter, transportation, some possessions, a rainy day fund, and enough in a prudently invested portfolio to support your desired lifestyle. Poet, author, and philosopher Henry David Thoreau once said, “Wealth is the ability to truly experience life,” and although I was never that good at always getting what I was supposed to out of Thoreau and his Transcendentalism buddies, I think what he’s saying is that you have to have money in order to do stuff. Coco Chanel, a French fashion designer and businesswoman, put it best when she said “There are people who have money, and there are people who are rich.” Be rich. Invest in experiences.


August 12, 2016

Is Your Investment Advisor Doing the Hokey Pokey?

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Over the last few months I have had numerous conversations with people regarding their investment advisor’s dance moves. It seems that over the past year there has been a lot of “dancing” going on in some people’s portfolios. Something along the lines of you put your money in the market, you pull your money out of the market, you put your money in the market and move your investment strategy all about. If that has been your investment advisor’s tune or you self-manage your investments and that’s your typical jam, I have one word for you: stop.

A strategy largely based on putting your money in and out of the market is essentially a market timing strategy, and imperfect timing is a very common cause of poor investment performance. The truth is, no one is smart enough or consistent enough to successfully invest with a money in and money out approach over a long period of time. Sure, you can be lucky and look brilliant over a short period of time, but, even so, the transaction fees and short term capital gains taxes generated by jumping in and out of the market time and time again will also diminish your investment returns.

Most people know they need to have a large portion of their assets invested to have a good shot at hitting their retirement goals and to protect their hard-earned assets against inflation. Investors need an overall investment strategy that is historically appropriate for their age and stage in life, withdrawal needs, and risk tolerance. Beyond that, it’s my professional opinion that relatively small tactical adjustments are appropriate when there are specific opportunities or risks in the market or world that you’re trying to navigate, but drastic investment strategy changes should be the exception - not the rule. Sometimes taking action and making a lot of changes in your portfolio can feel good, but “surgery by chainsaw” rarely works out best. Instead, considering things like the amount of U.S. versus international stocks, large cap versus small cap stocks, growth versus value stocks, corporate versus municipal bonds, and long-term versus short-term bonds can be a good idea. 

Consider this year for example. Who knew 2016 would get off to one of the worst starts for a calendar year in market history? What if you’d completely jumped out of the market in February because you thought it was the beginning of the next cyclical pullback and you missed the bounce back of March, April, and May and endured transaction fees and realized capital gains? How many people actually thought Great Britain would vote to leave the European Union? What if you’d completely jumped out of the market in June due to the surprise result, media barrage, and overreaction of other investors and you missed the swift recovery and positive market performance since then?

When investing you shouldn’t make too many one-way, all-in bets. You should view investing as a mechanism to give you a high probability of achieving your financial and life goals. Investing is a marathon, not a sprint. It’s not sexy and it’s not news, but I do firmly believe investing in a prudently diversified portfolio with a long-term outlook really does give you the best chance to accumulate and preserve wealth.

After all, isn’t that what it’s all about?