My advice would be, follow your dreams! Whatever dream(s) you come up with (and it can and probably will, change, over time) that you are passionate about, do not let anyone deter you from it. Do not get discouraged by a poor grade on a test in school or a bad grade in a course, a discouraging word from a friend or acquaintance, do not let anyone discourage you from pursuing your dreams.
You should spend the 30 to 40 “working” years of your life doing what you love. To do otherwise would be a tragic waste of time. Think about your life, think about how time passes. Joy equals doing what you love with the people you love. If you can only have one of these at any given time that is OK. But, if you love to travel, traveling with the one or ones you love will be a double joy. If you love to play piano, even playing by yourself (that’s called practice), you will also experience joy because you’re doing what you love. So, the key to life is to do what you love as much as you can with the people you love, as much as possible.
When you forfeit your dreams for someone else’s plan you end up spending time (potentially a lot of time) chasing a buck to pay the bills, keeping up with the Joneses and whatever else, just because you think you have to. The memories you will have later in life will not be what you spent your time doing if that time was mainly spent working to just keep up. The cherished memories will be the ones you had doing what you love with the people you love.
On to a financial topic. I had a conversation last night with a couple about investing in general. I told them how I thought it was funny that the investment industry asks each person the question, how much risk can you afford? I told them that I don’t think people really understand risk in the market and therefore that question is, somewhat irrelevant. As an investment advisor, I think it’s my job to assess the risk levels of all the investments we consider.
There are times when prices have fallen substantially either in individual areas of the market or the market as a whole and to us, that presents opportunity. The one Wall Street clichés I do believe still holds is “buy low, sell high”. There are several “formulas” or clichés, if you will that Wall Street has developed over the years to which many firms and their advisors adhere.
One of these is that your stock exposure should equal 100 minus your age (i.e. if you are 65 you should not have more than 35% of your portfolio in stocks (100 – 65 = 35). This is a gross oversimplification. I was delighted to hear Peter Lynch affirm my belief that “risk has nothing to do with age, it has everything to do with cash flow”. It appears to me that these static rules have been created by the large Wall Street firms so that the majority of “investment advisors” will have “rules” they can fall back on without having to do the day-to-day research necessary to assess the risk levels presented by the “markets” themselves. If your advisor relies on clichés about the market activity, then your portfolio will probably be overexposed, or conversely underexposed, from time to time.
Another interesting market strategy commonly practiced by investment advisors is “quarterly rebalancing”. Again, the masses in Wall Street firms are utilizing a four-day-per-year practice of “allocating“ or “re-balancing“ customer accounts. We think there’s nothing magical about March 31, June 30, September 30, and December 31 of each year for purposes of managing client accounts.
Another frequently used expression for “we don’t really know what’s going on“ is “we take a 60,000-foot view of the market”. I was quite amused the first time I heard this from a large firm advisor. Using the “60,000-foot view” in 2008 led to significant losses in their accounts. Can you really see if a dam breaks or a tree falls from 60,000 feet?
You can see that we believe active management will yield better long-term results than passive management. We welcome your thoughts and comments about the subject. Please email us or call us anytime to discuss this or any other topics with us.