Howard Marks, the author of the very popular “Oaktree Memos” once wrote, “The rest of us know many possibilities exist today, and it’s not knowable which of them will occur. Further, things are subject to change, meaning there will be new possibilities tomorrow. This uncertainty as to which of the possibilities will occur is the source of risk in investing.”
Read this part again – “This uncertainty as to which of the possibilities will occur is the source of risk in investing.”
Uncertainty and possibilities. They’re part of investing.
“What’s the money for?” It’s a question routinely asked here at Monument. Most answers boil down to a future need. People want their money to grow into a future amount that will fund a want or need. They require a return that is above and beyond the rate of inflation so that tomorrow’s dollars are worth something more than today’s dollars.
I love stories. I especially love telling them. I’ve had a rich life full of adventures and characters…stories flow off my tongue. Stories are fulfilling and can still be convincing even when facts are exaggerated.
The problem is when stories get in the way of facts. If facts were exciting, we’d all read text books instead of novels for fun. It’s why individual investors are so captivated by pitches from financial product salesmen. (You know, those brokers at the big investment firms trying to sell investment managers that revenue share with the firm from the fee you pay.)
When was the last time you heard a boring story from a hedge fund manager? When was the last time you were at a barbecue and someone was standing around telling a story about a boring investment?
Discipline is, in my mind, one of the single most important elements in any financial plan and investment strategy.
Discipline. That fact is boring. That fact does not make for a great story. That fact does not evoke a level of emotion that inspires people.
The only people that create stories out of discipline are people who have “made it.”
No one would watch a TV show like “The Biggest Loser” if there was no finale revealing of how “disciplined” turned into +100 pounds of weight lost over the course of a season. No one would read a book by a Special Operations dude that said, “Hey, I’m in the middle of really hard training and I’m disciplined enough to make it through,” with a final chapter titled, “Well, We Will See How it Turns Out…Wish Me Luck!”
The only stories told about investing discipline are told by those who have made it. The funny thing is, the story is boring and most people don’t want to hear it. They’d rather hear the short story from the guy who doubled his money on an IPO or from that gal who is killing it in her portfolio because she has all her money in Facebook.
No one measures discipline in a quarterly performance review. The real measure of discipline does not come from comparison against a benchmark.
The real measurement of discipline comes from ARRIVAL. Arrival at a point in time when the money you invested over 20 years ago has grown into an amount after inflation that funds the life you planned for.
When you’ve made it, you’ve arrived.
The stuff you read about in the news every day is nothing but messy. It’s short-sighted, biased towards entertainment value, noisy and in the grand scheme of things not worth your attention as an investor who has a solid handle on the answer to “What’s the money for?”
If you feel like your current investment strategy lacks real discipline, reach out to us. If you feel like your advisor is light on substance but long on stories and pitches, call me.
Keep looking forward – Dave
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