We spend much of our life waiting: waiting for a plane to take off, waiting for the right relationship to ‘happen’ to us, waiting for a promotion, waiting for everyone else to ‘get it’....
In the financial world there is endless discussion about future events which may or may not ever occur. For years there has been virtually daily financial news commentary about if/when the Fed will raise rates. Investors are waiting for the dollar to crater, the stock market to crash, Europe to implode…. The human brain not only spends much of its time projecting into the future (versus being in the moment), it has a very strong tendency to think negatively. This propensity is based on our DNA formed millions of years ago when the brain served as a survival (vs. a ‘thrival’) mechanism that warned us constantly about the next lion around the corner ready to gobble us up.
Simply put, human software, AKA our brain, has not had a material version upgrade in many, many millennia.
The problem with waiting and waiting for certain events to unfold is multi-layered. First, the event may never occur – or at least the way your brain envisions it (e.g. a market crash). At best you will get the timing wrong… way wrong. Current case in point: many very smart people have been predicting a 4%+ 10 year treasury rate for years. I’m sure there is more than one Japanese economist who has been predicting higher Japanese interest rates since the late 1980s. Further, if you happen to get both the event right as well as the timing, you then have to get the market reaction correct which is surprisingly difficult even for so-called experts. Just look at recent ‘no brainers’ like OPECs failure to curb production at a meeting earlier this year which lead to… wait for it… a 20% rise in oil prices in the following weeks (whereas Wall Street analysts immediately forecast a dramatic plunge in oil prices). Who would have predicted the dramatic increase in stock prices (including in the UK) in the weeks following the BREXIT vote? The instances where the stock market reacted in the exact opposite way logic would have predicted to some macro-economic event are endless.
The fact is that waiting for and trying to use myriad economic events as a means to manage your long term portfolio is foolhardy (Warren Buffett is on record saying he spends less than 5 minutes a year studying macro-economic matters and never takes them into consideration for his investment decisions). From a quality of life perspective, who wants to dedicate precious, limited heart beats to events completely outside of one’s control that may never even occur? It would be like waking up each morning with a new watch that is randomly set to a single time (a watch that is stopped), waiting for that time to arrive, and then proclaiming, “...see, this watch works perfectly!”
At Coastwise, our tag line of “Navigating a Richer Life” is intended to connote the notion that money is a means to live a deep, interesting, engaged, full, ‘rich’ life. You don’t get any prizes for dying with the biggest bank account, and you can’t take it with you. Yes, being prudent with your finances is important and having trusted professionals as part of your financial team – a CPA, an independent investment advisor (a fiduciary, not a broker) - is essential for your financial well-being and peace of mind. But with today’s information overload it requires discipline to turn off the noise. More information is not always better when it comes to financial decisions. Quite often inaction is the best form of action (think of all the poor investors who sold shares in their long-term investment accounts the morning after the BREXIT vote, only to see those same holdings increase in value within days).
When you find yourself being pulled to a financial TV show with the commentators flailing about spewing “BUY” “SELL” recommendations to viewers they have never met, turn it off and go call your kids, take a walk, pick up that book you’ve always wanted to read, feed your mind with interesting information that will make you grow as a human being. Get out of the future macro-economic event watching and predicting business and get into the living a rich life today enterprise. Your happiness – and ironically bank account – will both flourish.