View from the Chair: Windermere’s Market Perspectives (October 2020)

October 26, 2020

I’ve been participating in a personal development course called “30 Days of Excellence.” I’ve always gravitated towards opportunities to learn and improve, and the group leading this effort are individuals I want to learn from. The leader of the group is Jesse Itzler, serial entrepreneur behind Marquis Jet and Zico Coconut Water. (If you want to learn more about this program, please let me know – I’m really enjoying it!).

On a recent call, Jesse was talking about the importance of playing “the long game.” His message was simple – success very rarely comes overnight. You have to be willing to stay in the process, to do things others won’t, to control your emotions, to focus your mind, and to stay dedicated over a prolonged period of time if you want to reach your end destination. The “long game” can be applied to many things but as he shared those words, the first thing I could think of was this:

Investing is the ultimate “long game” experience

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I believe this is an important lesson to remember now more than ever. It’s no secret that investing has spread to a wider audience during this unusual time in our history. There have been countless news stories about the entrance of “Robinhood traders” (referring to the drastic increase in accounts within this broker/dealer platform that tends to be popular with the younger generation). Certain of these investors have taken to twitter to share their successes and trading strategies and many have been reported to be using financial tools (such as options and margin). Stories and tweets that seem to instill a perception that investing is “easy “and that it’s taking the place of gambling on sports make my stomach turn. Investing is none of those things. Investing in the ultimate long game.

And whether you are on Day 1 or Day 1783 of your investment journey, I thought it would be helpful to outline some key steps within this long game I call investing.

1.) Write out your starting point – You have to be honest about where you are starting from. You can do this by drafting a personal net worth statement – which lists out your assets (what you own – cash accounts, investment accounts, real estate, vehicles, etc) and your liabilities (what you owe – mortgage, car loans, credit cards, student loans, etc). If you have invested assets, also determine what they are invested in (types of accounts and types of holdings). Every subsequent day of your investing journey will be measured against this starting point – so be accurate and keep it in a safe place

2.) Calculate current cash flow – Again, put that pen to paper! Write out what you are bringing in versus what you are spending (and if you know of upcoming changes to that “math”, write that down too). “Money in” should include all salaries, pensions, social security payments, and investment income from taxable accounts. “Money out” should include all your expenses, including taxes

3.) Pinpoint your priorities – What are you investing for? What are your goals and priorities – both in the immediate and longer term

In discussions about money, it is often easy to lose sight of what the true priorities are. In order to drill down on this, I’d encourage yourself to ask at least 3 why’s. Here’s an example:

My goal is for my portfolio to grow to as large a number as possible – “Why?”

So that I can retire at age 50 – “Why?”

Because I don’t enjoy my job – “Why”

Because I always dreamed of starting my own business and instead I work a job I don’t enjoy ..

You can see how this exercise can play out. Perhaps instead of goal being to reach some unknown “maximum” portfolio value, the goal can instead be to generate an extra $15,000 of cash flow per year so that a business can be started and a life dream can be fulfilled. That dream could be prioritized sooner and allow you to take advantage of the one resource we can’t earn more of – TIME

You MUST decide what it is you want your investments to do for you – both in the short term and longer term – before you begin investing. Being vague and non specific about it won’t serve you. Write it down. Picture it in your mind. Create a vision board if you are a visual learner. Be as specific as possible. It matters

4.) Connect the dots – This can be a very involved step. This includes an analysis of where you are and a careful review of your priorities and goals – and then determines the steps that need to be taken to achieve your goals. Financial planning software can be very helpful in this process. We use the MoneyGuide platform, which takes a goals based approach – allowing you to see how likely it is you can reach your financial goal(s) assuming various investment plans and savings rates

5.) Set your blueprint – Once you have completed the financial planning process, you should have a working blueprint of how to invest – including how much to save, where to save it (ie: in what types of accounts), ways to trim expenses, and where to invest funds once they are saved (ie: in what asset classes and investment types)

6.) Team or no team – You also need to decide if you are going to “go it alone” or work with an advisor. This is not a decision to take lightly. You have to be honest with yourself and carefully assess your skill level, time, and interest. If you decide you need an advisor, spend the time understanding what various titles and certifications mean. In our opinion, you want to watch out for potential conflicts of interest and underlying motivations that could run contrary to your best interests. You may wish to align with a fiduciary – an individual/firm that has a duty to put your interests first. Feel free to visit this website for some unbiased information on how to evaluate advisors

7.) Monitor but don’t obsess – This is a never-ending step in the long game that is investing. You must pay attention to what is happening to your portfolio. It’s too important to ignore it and simply hope for the best. Set up a system for monitoring – whether that is monthly, quarterly, or annually is up to you and your advisor (should you work with one). Compare your progress against your established blueprint. Check in with your goals. How are you moving along? Are you keeping pace with the markets? Do you know what you own and why? It’s not just about the dollar value on any given day. Know what to look for and ask the right questions of yourself and/or your team

8.) Adjust on facts, not emotions – There’s nothing preventing you from making changes along the way. These changes could be in response to a shift in your priorities, your cash flow, your advisor, or countless other items. Adjustments that are logical and well thought out are appropriate. Emotional reactions (such as selling all your investments and abandoning your well thought-out plan when markets fall) will be less productive over the long run. Try to identify the difference

9.) Find a way to drown out the “noise” – there is incessant noise around investing and lately, it seems the volume has been turned up to a 10! Whether it’s media headlines, predictions from pundits about how various events will impact markets (ex; covid, the election)or opinions of your family and friends – the noise will never end. You have to find a way to control your reaction to it. You can’t control the swirl – but you can find a way to be calm and measured in the midst of it

10.) Keep on going – It is not going to be an easy process. There will be days (or maybe even months or years) where this process will seem futile. You may save and save only to see markets fall. You may carefully research an investment and have it not work out. You may hear of others doing better than you. But there will also be days (or months or years) where everything will come together and your plan will be moving right along. These are all parts of the long game. Stay focused. Stay committed. Stay invested.

Invest on and enjoy the “long game”. I’m still in it – and I hope you are too.


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