New Years Resolution

New Years Resolution

One of the “classics” in investing literature is Charles Ellis’ Winning the Loser’s Game. I happened to reread it recently, and what follows has heavy inspiration from the themes in his book. As the calendar has recently changed to a new year, many are resolving to improve their lives for the year ahead. With that in mind I sat down to write a New Year’s Resolution of sorts. Well, maybe not a New Year’s resolution, but rather a resolution for the “years ahead”. This investing and financial planning thing is NOT about short-term endeavors!

The title of the book lays out a framework for defining precisely what “game” you’re playing when it comes to your investing and financial planning decisions. Take a game like tennis. Tennis, the way the pros play, and tennis the way amateurs play is NOT the same game. The pros need to win points and force errors from their opponents who are highly skilled. For amateurs, if you simply keep the ball in play, it is likely your opponent will lose the point (instead of you winning it). Two different games. In investing, there are (at least) two different ways to play the game: attempt to outsmart and out pick other investors; a truly zero-sum game where the “winner” wins by as much as the “loser” loses. Or hitch your financial future to the wisdom of crowds and let entrepreneurs around the globe work on our behalf. Given historical results, the outcomes are likely to be sufficient to reach your goals while minimizing the chance of catastrophic failures.

If you’ve listened to us for any length of time, you know we believe we are better off (for a MULTITUDE of reasons) to pursue the later course. It doesn’t mean there won’t be significant market swings, or that on occasion we might wake up with “Monday Morning Quarterback” syndrome, but what was our goal when we started the process? My answer: to minimize the chance of financial failure and maximize the probability of success.

What is success? That’s defined by you. Your hopes, goals, and dreams.

Two foundational concepts that Ellis highlights in his book are “constancy of purpose” and “benign neglect”.

Benjamin Disraeli, Prime Minister of the United Kingdom in the 1800s, is quoted as saying, “The secret to success is constancy of purpose.” My translation of that idea: put one foot in front of the other, day after day, tenaciously pursuing our desired goals over decades, even when the storms of life blow us off course. That’s constancy of purpose. That’s what leads to success. And often in ways that are surprising.

And then there’s benign neglect. Set your course and leave it alone. Check on things occasionally but realize that there is so much “noise” and “uncertainty” in the market, that checking frequently may not provide additional, actionable “information”. The English language even has idioms like “a watched pot never boils” and “good things come to those who wait”. Understanding that markets provide returns over years and decades suggests we don’t need to know what happened yesterday on Wall Street. If pursued prudently, investing and financial planning should be boring.

So, with that preamble, here’s my resolution for the years ahead that I hope you will adopt along with me:

In the years ahead, may we aspire to “constancy of purpose”:

Constancy of purpose with respect to your personal “Why”. Or to say it differently, to identify and hold fast to your fundamental goal; the singular ideal that is your “true north”, your “guiding light”, the benchmark that all decisions, financial or otherwise, will be measured against.

And yes:

Constancy of purpose with respect to your finances and your investments. That they may be in alignment with your “Why”; that they may be long-term in nature with success measured by decades and increased predictability, and not by the last quarter or the last week.

In the years ahead, may we aspire to “benign neglect”:

Benign neglect in that we know short term swings (of even 3 to 5 years) have minimal significance over your lifetime.

Benign neglect so that we can “spend” our attention on the truly important things like family, our physical health, and the health of our communities.

The tagline for von Borstel & Associates has been “Aligning Values, Vision and Wealth®” for years. It’s unlikely to change. We are here to help keep you focused on your goals through Constancy of Purpose and Benign Neglect. That’s a resolution we’ll proudly support!

Sincerely,

Craig Smith, CKA®, CFP®, CFA® 

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.