As I mentioned in my last post, I went on vacation to Lake Powell this past week. If you’ve never been there or heard of it, it’s a gigantic lake in the desert that’s a boaters paradise. We pitched tents on the shore and only stopped boating to eat dinner and to sleep.
While the trip was enjoyable for many reasons, one of the best parts about going to Lake Powell is there isn’t any cell phone service. You’re forced to put your phone down and be present.
When the trip ended and we traveled back into cell phone service, my phone began to flood with all of the notifications I missed. I had accumulated over 900 combined texts, emails, and messages in the span of four days. Now, I’m sure that some of you receive far more notifications than I do, but I feel like over 200 notifications a day is quite a bit. That’s a lot of instances to have to check your phone or computer each day.
As I was thinking about this, it occurred to me that there’s an investing lesson here. And naturally, I decided to write about it.
The goal is to invest for the long term. It’s the most predictable, sustainable way to grow your money. So simple, yet difficult to actually do.
Every day we get bombarded with distractions that tempt us into short-term thinking. Whether it be a podcast, Youtube, Twitter, CNBC, a friend, or a family member, there is always someone willing to feed the small bit of anxiety in the back of our minds telling us to change our strategy or to stop investing altogether.
A recent example is this tweet I saw from Robert Kiyosaki, the creator of the massively popular book Rich Dad, Poor Dad:
The best time to prepare for a crash is before the crash. The biggest crash in world history is coming. The good news is the best time to get rich is during a crash. Bad news is the next crash will be a long one. Get more gold, silver, and Bitcoin while you can. Take care.
June 27th 2021
5,596 Retweets27,293 Likes
This has become Kiyosaki’s schtick. He likes to call stock market crashes. He’s been selling a book since 2002 in which he predicts the “biggest crash in world history” and reprints it every few years to try and take credit for the periodic downswings that do happen as part of a normal investment cycle.
His book, Rich Dad, Poor Dad, is a must-read for many people and he has legitimate fans that listen to and act on what he says. While I think this tweet is ridiculous, if you hold him in esteem and see this on your
Twitter timeline, it’s natural that it would make you feel a little rattled and possibly second-guess your investment strategy.
Successful investing has less to do with what you know and everything to do with maintaining good behavior.
The interesting thing is, no one thinks they need behavioral coaching. A survey conducted by the FPA asked investors to rank what they value most when working with a financial advisor. “Helps me stay in control of my emotions” was ranked last among the list of 15 attributes.
Behavioral coaching is one of the best things an advisor does that no one seems to value.
Given that nearly 47% of all Robinhood users get on the app on a daily basis, which is just below the most successful social media companies, I’d say that helping investors stay on track and invest with a long-term perspective is as important as ever.
The question shouldn’t be “how can I earn the highest returns right now?” but “what are the best returns I can get for the longest period of time?”
Howard Marks, co-founder of Oaktree Capital Management, tells the story of a client who had been managing a portfolio for a little over a decade and never gained extraordinary returns. For the time period, he received slightly above-average returns. Here’s the kicker, by being in the top half for 14 years, he ended up in the top decile for the whole period.
The reason is most investors eventually shoot themselves in the foot and he was able to eliminate all bottom half returns. If you always swing for the fences you’re going to end up with quite a few strike-outs.
Remember, the goal is to invest for the long term. Average returns for an above-average period of time will lead to incredible investment performance. It’s the most obvious secret in investing. All you need to do is avoid the distractions.
Thanks for reading!