Categories: General Date: Jan 19, 2012 Title: 15 Tips for 15 YearsFinancial and Personal Lessons Learned
December 2011 was my fifteenth anniversary in this business. Anniversaries have a tendency to inspire retrospection; looking back over my years as a financial advisor, I recalled fifteen things I have learned along the way, one for each year. Most of these lessons are related to financial planning or investments, but the ones that are not are probably the most important to the ultimate goals in my life, in the coming year and in the years to come. May you and yours have a wonderful 2012!
1. Most investors are always wrong. Unfortunately this is not an opinion; it’s a fact. Average performance of an investment does not equate to average investor return. Over that last twenty years through 2010 the S&P 500 returned 9.14% while the average equity fund investor over that same time frame earned 3.83.
2. "The only thing new in this world is the history that you don't know."
– Harry Truman
This is some of the best unintended investment advice ever given. As a person who gives investment advice, I have found my time is best spent studying the great investors and markets of the past vs. studying the current markets and getting caught up in all the noise of the current events.
3. Do the work. Among the people and organizations I have been exposed to, the one common trait of success is the tenacity with which they approach their objectives. Conversely, most great ideas/people that I have seen fall short of what they are trying to achieve has been due to lack of commitment to their goals.
4. Leadership is not about what you know; it is about who you are. Always be yourself, remain strong in your convictions, and stay humble.
5. There is a difference between information, knowledge, and wisdom. Information is no longer a commodity and has not been for sometime since the advance of the Internet. The you-have-a-question-here's-your-answer or knowledge-based advisors are everywhere and have little long-term impact on improving people's situations. Wisdom, or the ability to apply information and knowledge, is what people crave. To be able to articulate why someone should use this information or knowledge is a rare find across most professions.
6. Avoid energy vampires (people, things, or activities that suck your time and energy from you). For me, these are typically avoidance behaviors or people that keep me from doing what I am called to do. Identify these vampires so that you are conscious of them and then take action so that your energy is spent on the things that are important to you.
7. Trust is built when no one is looking.
8. The DOW average closed at 6522 after the close of my first day in this business. Even in this past lost decade the following quote from Nick Murray still holds true, "The downs in the market are temporary and the ups are permanent."
9. Valuation of any type of investment should never be used as an absolute timing tool. All types of markets are subject to significant overrun, past the point that the consensus holds they can’t possibly go (i.e. .com stocks, real estate market of five+ years ago, current gold market, tulip-mania in Holland). Emotionally, we are wired to invest in these investments when valuations are high or sell when they are low. Investor behavior matters.
10. A portfolio of investment’s end goal should never be to "make the most" or "beat something." The purpose of the investments as it relates to your situation is what should dictate advice. For most people, avoiding the big mistake inside an investment portfolio is much more of a concern than outperforming your next-door neighbor's rate of return.
11. Financial visioning is a better description of what we do than financial planning. A plan without a well-thought-out vision is of no value, although it remains the dominant approach of our industry towards solving working with families. Panoptic’s vision is to change this.
12. Focus more on activities than results. For example, losing weight is a goal. Working out 4 times a week at 6:00a.m at the gym's boot camp, implementing Weight Watchers, calendaring the necessary time for meetings, and reading four personal health books over the course of the year are activities. I have learned the hard way on applying this to working with clients. Giving a client a stack of paper that somehow predicts where they are headed over the next one-three decades is a wasteful use of everyone's time. Inspiring the client to implement the activities that will make their ideal vision of the future come true over the coming years is what creates lasting value, and a much higher probability of success for the plan becoming reality.
13. I have seen more money lost in trying to get a high yield on investments under the illusion of safety than any other type of strategy. Enron was yielding close to 18% the day before it went bankrupt. High yield strategies can have and often do have more risk than good stock investments, which are viewed by most investors as "riskier."
14. Start a gratitude list and make sure you put it somewhere easily accessible. Our gifts are unimaginable to most of the world and previous generations.
15. Honesty and forthrightness from all parties are directly correlated to the success of the work that comes from financial planning meetings. If either side is holding back, it reveals itself later in the form of negative results.__________________________________________________________________________
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is not guarantee of future results. All indicies are unmanaged and cannot be invested into directly.
If you have a suggestion for a topic to address in an upcoming newsletter, let us know. We’d love to get your feedback.