Patience and Perspective

Patience and Perspective


“Markets take the stairs up and the elevator down” is one of the first lessons learned in the self-study course that is Behavioral Finance 101.

Progress and the climb up tends to feel slow and hardly noticeable, while drops tend to happen more quickly inducing feelings of uncertainty, fear, panic, and a race to the emergency exit.

Patience and perspective are crucial to successful investing, though. Take the graphs above, for example.

Graph #1 (above, top) shows the return of the US stock market (S&P 500 Index) over the last 12 months. If you watched the markets or listened to the news at all over the last 12 months, there were plenty of reasons to feel uncertain or fearful or even panicked to the point of racing for the exit. Truth is these past 12 months have been a pretty typical representation of the “normal” market journey. Up, down, up, down some more, then a slow steady climb back up. It can feel like a roller coaster if you watch it every day.

However, if you change your perspective and zoom out a little, a much different picture is painted. Graph #2 (above, bottom) shows the return of the US stock market (S&P 500 Index) over the last 10 years. The roller coaster ride becomes much more steady and much more palatable.

Markets will go down. EVERY investor will feel the urge to want to head for the exit, but markets are resilient in the long run. The markets reward the patient investor who can look past the choppy waters beneath them and keep their eyes focused on the horizon.

by Jun 21, 2019
The Peace of Mind Premium

The Peace of Mind Premium


Have you ever felt so clueless about a decision or purchase that you have to do a Google search just to figure out what questions you need to be asking or considering?

And, then, after armed with the best questions that Google can supply, you realize that even if you get the answers to your “7 Best Questions to Ask a Fencing Contractor”, you still don’t know what the answer means or why you should be asking it.

I know nothing about fences. I know that I’d like a fence to keep my kids safe from the unattended pools of my neighbors. I know that I’d like to keep my dog from occasionally wandering off our property. I know that I don’t want the fence to look cheap.

So, I did what Google said. I interviewed two contractors. I went in cluelessly prepared with the “7 Best Questions to Ask a Fencing Contractor”. As a result, we surprisingly picked the one that cost 20% more…and it was the right decision.

Fencing Contractor #1: “300 linear feet at $9 per foot…it’ll run about $3,100. Call us when you’re ready.”

Fencing Contractor #2: “The area measures 300 linear feet. It’ll run about $3,700. We’re going to cost more than most because we set every post in concrete where most others drive them in…this will prevent the posts from leaning and needing to be reset 4-5 years from now, and we add a tension wire at the bottom of the fence that makes it easier to trim the grass under the fence. Another thing we need to consider is the positioning of the gates…”

I asked questions not even knowing what answers I needed or wanted to hear, but it was how my questions were answered and the answers to questions not asked that made the choice clear.

Did I make the best financial decision? Maybe, maybe not…it depends on your priorities, but I’m good with it. I feel confident that the questions and concerns that I still don’t know to ask have already been answered and accounted for, and I’m less concerned about the future issues that may pop up and the additional costs to fix them.

Sometimes the price isn’t the real cost. Sometimes it’s worth paying more now to avoid paying more later. Sometimes it’s worth paying for quality and paying the “peace of mind” premium.

Here are the stories that caught my eye this week:

MONEY: Wealth Is The Stuff You Can’t See (A Wealth of Common Sense)
“It may not feel like it to everyone, but the developed world now has more money to spend but less time to do it. The problem is these numbers are averages which helps explain why so many people have a hard time ever saving money. Trying to keep up with people that make more money than you is a never-ending game because there will always be people willing to outspend you.”

LIFE: At 98, D-Day Veteran Medic Returns To Normandy To Remember A Generation’s Sacrifice(NPR)
“For much of his life, Ray Lambert wouldn’t talk about World War II. But then the 98-year-old veteran army medic began returning to Normandy, where, on June 6, 1944, he led a unit of medics as a 24-year-old staff sergeant in the Allied invasion of western Europe.”

by Jun 7, 2019
Destination Unknown

Destination Unknown

Weekend Pivot Points

“Alexa, what should I pack for vacation?”
“Swimsuits…beach towels…beach chairs…beach toys…sunscreen…”

Helpful? Maybe…if you want to go to the beach.

But what if you want to go on a four-day camping and hiking trip? Mostly useless.

If your destination isn’t defined, the well-intentioned advice of others may leave you perfectly prepared for someone else’s trip.

Whether vacationing or investing…for more effective advice and better results, define your destination first, then start packing.

Here are the stories that caught my eye this week:

MONEY: Not Efficient, But Effective (Of Dollars And Data)
“Most of your financial success is going to come down to one simple metric: your savings rate. It might seem absurd, but it’s true. If you can save enough money, none of the other financial advice on this blog will matter. Why? Because with a high enough savings rate, you will never need to worry about your asset returns.”

LIFE: A sense of purpose could prolong your life (Quartz)
“The meaning of life is a question that has plagued philosophers for millennia, and there is no single correct answer. But increasingly, scientists are finding that having a sense of purpose, whatever yours may be, is key to well-being.”

by May 31, 2019
When Quitting is the Right Choice

When Quitting is the Right Choice

Weekend Pivot Points

A friend of mine quit his job recently. He was good at his job. He made good money. He had autonomy over his schedule. He had unlimited vacation. His job had many of the qualities that we all think we want. But he quit anyway.

He had lost the sense of fulfillment in his work some time ago. He always had another “itch” that he wanted to scratch, but every time he worked up the nerve to consider quitting, the money or the offering of new incentives had a way of reeling him back in. It wasn’t that the money and incentives were SO GOOD that he couldn’t ignore them, but they were just enough to make the pain of staying a little less.

This “Do I stay or do I go?” dance has played out repeatedly in some capacity over the last several years. For years, though, the decision was always one requiring a huge leap of faith to throw away the comfortable, known quantity of the current path for one of potential excitement but filled with uncertainty.

But then…something happened that disrupted the equation and closed the gap of uncertainty between the familiar path and the new unknown. Suddenly, the familiar was less familiar and year’s of contemplating the unknown had in some way made it feel more comfortable…and what was once a giant leap of faith was now a much less intimidating step.

A case could be made that he was lucky. Lucky that a change in circumstance nudged him to make the change.

A case could be made that he was courageous. Courageous that he threw away the easy, comfortable path for the path of uncertainty.

The truth is likely somewhere in between, but what many people don’t get to see are the years of mental and financial preparation happening behind the scenes to put himself in a better position to take the leap when the time was right.

Quitting isn’t always the right answer, especially when it’s done emotionally or impulsively. But, sometimes quitting and change is the right choice in the long run when it’s planned, calculated, and well-thought-out.

Here’s what caught my eye this week:

MONEY: How to Teach Your Kids About Money (MintLife)
“There’s a specific conversation I frequently have with people around my age. As they get closer to middle adulthood and look back on everything they’ve learned about money, they start to wonder – why didn’t they teach us this stuff in school?”

LIFE: Men Have No Friends (Bonefide Wealth)
“Over the weekend my wife shared an article with me from Harper’s BAZAAR titled “Men Have No Friends and Women Bear the Burden” by Melanie Hamlett. It’s a stellar examination of the emotional lives of men if not masculinity itself. It details why so many men are terrible at making friends, expressing themselves to other men and why we believe that women are the only people we can turn to for emotional support.”

by May 17, 2019
Teaching Money

Teaching Money


It’s May. It’s the end of the school year. It’s graduation time. Summer-itis is taking over.

If you’re a teacher (as I know some of you are), you may have had the thought recently, “what can I do to keep these kids occupied (errr…out of trouble) for these last few days or weeks?”

Well, if this is you, I have a recommendation: Build Your Stax. I may be a bit biased in this suggestion…I am a financial planner after all…but, nonetheless, it’s a great way to introduce older kids (or even adults, for that matter) to some invaluable life lessons around personal finance and money management through an interactive, gaming experience.

It’s a free, online game that teaches kids how to invest through the experience of making 20 years of investment decisions in….20 minutes. The goal is to build the most wealth over time while interactively competing against the computer and/or classmates. Play it alone or play it in a group, but, for best results, play it repetitively.

Kids will learn why having an emergency fund is important as “life happens” via unexpected surprises, like hospital bills, loan repayments, wedding expenses, etc. They will learn that diversification matters in protecting and growing your wealth by building a portfolio consisting of savings, CD’s, stocks, bonds, and/or index funds. They will learn how compounding interest works and how crucial it is to building wealth over time. They will learn that life can be unpredictable and so can the stock market. But most importantly, they will learn that patience most often triumphs over emotion in creating wealth.

Give it a try…with your students, with your family, or even by yourself. Play, learn, adapt, then play it again!

Here’s what caught my eye this week:

MONEY: Financial Superpowers (A Wealth of Common Sense)
“While trying to boil down the many reasons for Warren Buffett’s long-term success, Alan Greenspan once told the Oracle, “Warren, it strikes me that if you did nothing else you never sell. That is, if you can grit your teeth through and just disregard short-term declines in the market or even long-term declines in the market, you will come out well.”

MONEY: How does the stock market work? (TED) *VIDEO*
“In the 1600s, the Dutch East India Company employed hundreds of ships to trade goods around the globe. In order to fund their voyages, the company turned to private citizens to invest money to support trips in exchange for a share of the profits. In doing so, they unknowingly invented the world’s first stock market. So how do companies and investors use the market today?”

LIFE: PARENTS: Don’t Sacrifice Yourselves On The Altar Of Your Children’s Education (Tim Maurer)
“Parents have sacrificed their financial futures on the altar of their children’s education. Fueled by easy federal money and self-interested colleges, the result is a student loan crisis that appears already to be eclipsing the catastrophic proportions of mortgage indebtedness leading up to the financial collapse of 2008.”

by May 10, 2019