If these were normal times, I’d be writing about the September CPI and PPI inflation reports. However, as the government shutdown marches on and economic data reports are delayed, it gives me the chance to write about some new & different topics. This week, I’m writing about another excerpt from a great book I’ve discussed in recent weeks – Same as Ever by Morgan Housel.

I highly encourage you to read the whole book. It’s a fun read of behaviors, patterns, and situations that stay the same in an ever-changing and ever chaotic world. You’ll find yourself nodding along and thinking “I do that!” “I agree with that” A recent chapter I read – Casualties of Perfection – gave me a lot to think about (and agree with).

As Morgan writes – “people don’t like to leave opportunity on the table. A common urge is to squeeze out as much efficiency and perfection as you can from whatever you’re pursuing. It feels like the right thing to do”

This quest for perfection can work against us in many areas of our lives, including life as an investor where seeking perfection is very tempting. Maybe we want the highest return we can get in any given year (even if our financial plan requires a far lower hurdle rate). Maybe we are laser focused on tracking or beating a benchmark (regardless of if it’s exactly in line with our objectives and risk tolerance). Perhaps we hesitate to sell/trim a stock position because it may not be the top price and we can’t bear to miss that exact mark. The ways investors seek perfection (conscious or unconscious) is endless. The bad news is that perfection is virtually impossible to achieve. The good news is, as Morgan outlines, that perfection is not needed and most of the time, “good enough” works for long-term compounding of wealth.

How can that possibly be? Take a look at a few investing practices that can work better for most investors a little inefficiency/imperfection within them

Cash allocation – if you were seeking perfection, you’d focus only on the fact that cash is a drag on performance in most markets. However, it’s essential for investors to have an emergency fund/cash reserves to stay the course over the long term and ensure liquidity needs are met. As Morgan says, “it’s as valuable as oxygen during a bear market”

Leverage – if you wanted perfection and maximum returns in a bull market, you may seek out leverage (borrowing against your assets to buy more investments). However, leverage is the surest way to lose everything (or at least a lot) if the market turns against you

Concentration – owning a large percentage of any one stock or asset class may maximize returns in the short run (if you are right). However, diversification (while potentially not “perfect”), increases your odds of owning a winning company and building wealth over time

Analysis – Wall street would have you believe that you need to do endless analysis and prediction to perfectly opine on the economy, company earnings, and market trendlines in quarterly increments. The problem is no one is that accurate and perfection in analysis is a fool’s errand. Focusing on the longer-term makes it far easier to predict accurately – or at least be “good enough” to get the trend line right

As Charlie Munger was quoted as saying, “it’s better to be approximately right than precisely wrong.” Investors tend to be well served by understanding their goals and objectives, determining a portfolio that is likely to meet the required return over the long run, building in safeguards to prevent costly errors and poorly timed withdrawals (like a cash cushion and no leverage), and simply sticking to the plan. Do the work to define your “good enough” and focus on that. Perfection is not needed. Persistence and Presence are.

Onward we go,