Overheard in Starbucks …
“When I step out of my office at the end of the day, I’ve completed a leg in a very important race in my life. But when I step over the threshold of my home, I’ve begun a leg of a far longer and much more important race.”
365 days to your richest life: day 5/6
Whether you want to manage your own investment portfolio, or simply have more informed and knowledgeable conversations with your adviser, it is really very easy to find out as much you need to know. (’Knowing’ isn’t the only component of successful investing, but we’ll get to that later this week.)
In the meantime — if you’re ready — here are the ONLY links you’ll need:
To buy stocks and index funds (if you don’t know what an index fund is, you can find out on the site) and learn how to evaluate stocks, visit Canadian Shareowner.
To learn how to create a solid, long-term, diversified, low-cost portfolio in only 20 minutes per year, learn about the Couch Potato Portfolio at Moneysense.
Can it be this simple? Absolutely.
365 days to your richest life: Day 4
You may be beginning to notice those posts are rather random. My intent is to give you something to think about each day, a thought that will — in application — increase the quality of your life through greater financial wellbeing.
Today I’d like to pontificate on the subject of investment, and though I’m hoping I can do that succinctly, I have a bad feeling this may take a while.
Twenty years ago, I believed — as you probably do today — that brokers, financial advisors and planners were professionals whose job it was to identify profitable investments. Then I spent 20 years working with the same — oh, wait, I was one — and found that it is truly impossible to identify those investments that will perform better than average in advance. That may sound like sour grapes, and perhaps it is, but the aha moment for me didn’t have anything to do with my own clients. (Perhaps the good news is that even vaguely competent advisors can generally, if they choose, keep their clients out of the worst investments.)
On the fateful day, I was doing some reorganization of my senior partner’s client files. With more than 25 years of experience, this fellow was very intelligent and informed and cared deeply about his clients. He spent hours each week using the latest analytical tools to identify the best-performing mutual funds, and then recommended them to his substantial client base. Going through those files, I realized I could tell what year each client had joined his practice by the mix of investments within their portfolio. I also realized, more upsettingly, that almost none of those investments had performed as well the year after they invested as they had the year before.
In the years since, I’ve become very clear on the fact that the investments that performed well last year are likely to be this year’s dogs, and that most advisors do not have the sales magnetism to persuade new clients to invest in last year’s underperformers.
The sales process is, in other words, at odds with the very foundation of investment success.
As disturbing as that is, there is some excellent (not just good) news in all of this: the value of financial planners, advisors and stock brokers is not in their ability to choose next year’s best-performing investments. What is their primary value? Well, for that, my friends, you’ll have to come back another day.
365 days to your richest life: Day 2
In 20 years of studying the financial markets and personal financial planning, the advice that I find myself thinking about is simply that: Think.
I can’t remember where I read it, but it referenced the subject of spending less and saving more, and it was simple enough to be frustrating to today’s wisdom seekers. Think before you buy.
Wherever we land on the income/net worth scale, it is likely we can acheive greater satisfaction and a richer life by thinking before we buy. In my workshops for people wishing to heal their income/expense ratio, I recommend finding six things in your home that you regret buying. (Start with your clothes closets.) Write them down, along with their approximate price, on the back of a business card. Use an elastic to attach that card to your credit card, or just place it in a prominate place in your wallet.
For purchases over a certain amount (for me, it’s $20, but for some of my clients its been as high as $200) give yourself a 24 hour cooling off period. You’ll be amazed how the infatuation wears off in as little as a day.
Remember, restricting your purchases to items you love and that will serve you well for years to come is good for your financial wellbeing, it’s good for the planet, and it leaves space in your life for the beautiful and useful. Storage and organization aren’t the problem, folks — it’s the mountains of stuff we’ve accumulated.
An anomalous year provides a glimpse into the brokerage industry
Customers, Not Brokers, Profited in an Odd 2007
Last year, many ordinary investors did reasonably well. The brokers did not. How could that happen?
Technical glitches
We’re having difficulty accessing uploaded files, so if you’re trying to access the PDF exercise ‘Navigating the Human Heart’ you’ll receive an error message. I’m working with my service provider to overcome the technical gremlins, but in the meantime, please feel free to send me an e-mail at admin@richestlife.org and I’d be happy to e-mail you the PDF.
Solid thinking on investment
From the New York Times:
Note: In the long distant past, a Canadian reader chastised me for including links from the US, which he described as ‘inapplicable in Canada.’ To the contrary: I link only to information that is universally useful to investors. While the stats may be somewhat different in different countries, the lesson is equally applicable anywhere.
Thinking about 2008
In my experience, New Year’s resolutions don’t hold much water. The commitments that seem so very manageable in theory prove very difficult in the dark, hectic days of January, and soon become just one more reason not to believe in ourselves. So this year, I encourage you to resolve not to resolve — instead, just count the blessings of 2007 and create some room for more in 2008.
How to create that room? Well, that’s a different process for everyone, but in the 20 years that I’ve been a privileged witness to the intimacies of other people’s financial lives, I’ve found that there are some common obstacles to true wealth. In the days to come, I’m going to post some of the ideas I’ve found worth considering — ideas that have enabled the people I’ve worked with to acheive their goals and live their richest life.
People that succeed at achieving their dreams do so, in part, because they’ve learned to reject criticism and other negative feedback.
Ultimately, both financial wellbeing and quality of life depend on our work, whether that ‘work’ is our primary source of income or the mission we feel called to fulfill in our one ‘wild and precious life.’ Enjoying and flourishing at that work requires a healthy amount of self-esteem, optimism and confidence: a sense that we have what is required to move forward and succeed. (Without that sense, we won’t have the courage and faith to reach for our dreams, or the strength to persevere when the inevitable challenges arise on the path.)
Criticism, if accepted, is a poison that damages self-esteem, optimism and confidence. But in Western culture, criticism is so widely accepted it is a profession. Well-meaning people offer criticism every day, and they do so because they think they are being helpful. They believe they know something that the person or organization they criticize does not know, and could benefit from knowing. (Criticizing is, at its heart, a way of elevating ourselves above the person or organization we criticize.)
A world without criticism would be a much more enjoyable world, but the truth is that world doesn’t exist yet. So how do we inoculate ourselves against criticism that would otherwise undermine our success? Here are some ideas that I’ve seen create wondrous results in the lives of ultimately happy and prosperous people.
1. Ultimately, any feedback on our endeavours offered verbally by other people falls into two categories: ‘this is my cup of tea’ or ‘this is not my cup of tea.’ Criticism is an indication of preference, and preference is personal. Though we often assume that other people feel the same way we do, we are equally often wrong.
2. Both positive and negative feedback can be equally misleading: numerous studies have shown that there is little correlation, for example, between the number of people who say they plan to buy something and those who actually do.
3. Even critics that are viewed as experts in a given field are stating their preference. While they may be more dangerous or helpful, due to fact they are taken seriously by other people, they are just as vulnerable to viewing a movie or a book through the lens of a bad day or a good date. (Some seem to be chronically morose, and others chronically happy — both have their fans.)
4. There are two kinds of feedback that can be relied on: your intuitive response to your own accomplishments and the money and time other people are willing to spend on or invest in your offerings.
5. Chronically negative people are ‘vexations to the spirit.’ They are also vexations to ultimate prosperity: just as healthy people avoid junk food and cigarette smoke, successful people limit the amount of time they spend with negative, judgmental, critical people. Instead, they surround themselves with optimists and enthusiasts, and harness that positive energy to transcend challenges and achieve their aims.
Tomorrow, read about ‘the right number’ — the income you need to be happy.