“Well begun is half done,” the proverb says. And we tend to agree. Since it’s your journey, we don’t like to sweat the particulars: it’s never too early to start, but it’s also never too late.
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Suppose someone told you, “I’m worried about what will happen in the future, so I want to make sure I have less money when I get there.”
This makes no sense, and yet, it is essentially what conventional investing wisdom tells anxious investors to do: “Hedge your risks! Seek safety!” But what does this mean? When investors choose “safety,” they are sacrificing their growth over the long term. In return for stability in the short term, they are choosing a smoother ride to a poorer future.
It’s human and normal to feel concern for the future. But choosing, in the moment, to soothe that short-term fear about long-term returns by avoiding volatility means you may be sacrificing those exact long-term returns that would soothe your concerns.
And investing for the long term doesn’t mean foregoing spending—it means a little bit less short-term spending now in exchange for (hopefully) a little more spending overall, in the long run. Spending more money now does mean that you will miss out on opportunities to invest that money for compounding returns, so it can be another road to a poorer future.
Choosing to invest for the long run is not a path of deprivation. Suppose the worst of the worst just happened last week: nuclear war broke out, or a giant asteroid hit Texas, or maybe you got struck by lightning. Should the worst happen, you are not likely to go out wishing that you had invested more conservatively: “If only my balances hadn’t wiggled so much! If only my returns had been lower!”
But maybe you could go out a little more content knowing that at least you committed to a possibly-more-abundant path: you chose to focus on the long term, and maybe you enjoyed some of it along the way. Maybe you found the perfect house for you, maybe you took that amazing vacation with your loved ones that you’d been dreaming of. You made your life happen along the way.
We invest for the long run; we spend for the long run too, so to speak. We don’t invest for a poorer future; we don’t spend beyond our means. (The road to broke is never worth it.) And, as always, you need to understand where your short-term money is—and keep it out of your long-term buckets.
We think the smart money is in investing for the best possible future. But we never know what the future may hold, so it does make some sense to hedge your bets. At 228 Main, we don’t tend to think of hedging investments in terms of bonds or gold or real estate—or any conventional option that sacrifices returns for Future You in order to pander to the fears of Current You.
Instead, you could continue investing for long-term growth and spend some money on the ultimate hedge: living your own best life.
Ready to talk about what this means for your portfolio? Call or write, anytime.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.
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No matter their savvy or experience level, most investors would probably agree that money is a means to an end. It’s not an end in itself. You could have all the cash and all the stock certificates in the world, but you can’t eat them or burn them for fuel. They make terribly inefficient insulation. They’re less fun than a deck of cards.
But when it comes to deploying our money to optimize pleasure, finding joy can be more of a challenge than you’d think. One reason? Psychologists call it the “hedonic treadmill”: our brains are so good at getting used to things that they will keep chasing new pleasures, new experiences, and the next thing that will bring us a boost.
In terms of our spending, this means that we get used to fancy new gadgets sooner than we think we will. Luxury goods lose their luster as fast as anything from the bargain bin.
The danger is that if we don’t notice that we’ve started running from one thing to the next, the costs mount and the returns on enjoyment diminish.
Consider how we make decisions the larger the ticket price gets: housing and transportation are huge outlays, and they make up sizeable portions of many household budgets.
Is the purpose of buying a new vehicle to replace a family car, to enjoy the everyday pleasure of being able to get reliably from point A to point B? Or is this “for fun,” for the joy of driving and being seen driving a particular make or model? If this is fun money, are you okay with the fun that might be given up, if the money goes toward this one decision?
It’s okay to deploy our discretionary spending however we see fit, but we might do well to remember something powerful: we shouldn’t underestimate how gratifying even the smallest of joys can be. In fact, sort of like the effects of compound interest, routine doses of fun can go much farther than those fewer, farther-between spending sprees.
This is why it’s vexing to hear a little treat like a latte get such a bad rap. As writer Laura Vanderkam explains, such “small, repeated pleasures” have the power to give life a lift, regularly. And better, even a lifetime of $3 lattes will not sink your longer-term goals the way that a $300,000 status symbol—like houses or cars truly beyond our means or needs—could.
So what do the happiest people know about spending? That if you want more of that proverbial bang for your buck, think more about the frequency than the size of life’s pleasures. The big stuff may be overrated, in that humans tend to overestimate the impact that large purchases will have on their happiness.
Tending more often to your joy and enjoyment as you spend? Now that sounds like a nice way to direct your time and money.
Want to talk more about how your money is working for you in your everyday life? Let’s visit, anytime.
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When I was young, I pictured my retirement account as a pot of gold. It would be there at the end of the rainbow, when my career is done, to fund my retirement.
Talking with folks, it seems like the pot of gold is the type of thing lots of people think about when the subject is retirement. Whether it’s finding their “number,” amassing a big enough balance to feel “safe” enough to retire, or hitting a nice round goal like $500,000 or $1 million, the lump sum is the thing.
The challenge with thinking in lump sums is, we live our lives moment to moment, month to month. We have food to buy every week, bills to pay every month, and holidays or travel or projects to fund every year.
In other words, life happens with recurring income—not a lump sum.
A pot of gold sounds nice, but when you take gold out to do something or buy something, it’s gone: you can only spend it once. This may be why some people with substantial resources still don’t feel comfortable with the idea of hanging up their earning power. They’re stuck on discrete balances instead of ongoing flows.
Long ago I realized that what we need in retirement is an orchard, not a pot of gold. The orchard produces a fruit crop, and the crop is what meets our income needs for a year. And when it’s over, we still own the orchard! Next year, another crop. When the orchard is sustainable and can produce a fruit crop big enough to live on, we’ve become financially independent—and don’t need to sell our labor to pay our bills, anymore.
One of the best things about the orchard is that it does not matter how long you live. If the fruit crop each year is big enough, you won’t run out of resources. We tend the orchard and keep it healthy enough to supply the crop.
And when you are done with it, “you can’t take it with you” as they say, so the orchard gets passed down to people or causes you love. You don’t just leave an empty pot, where the gold used to be. Instead, the ground can be made ready—for whatever’s next.
Email us or call if you’d like to talk about turning your pot of gold into an orchard.
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Quite a bit of the news around retirement research focuses on shortfalls. How many of us have heard a headline lately about how many people aren’t saving enough for retirement or aren’t hitting their retirement goals?
It can sound bleak. But when you get into the numbers, things are a little more nuanced. (Examples: people sometimes overestimate what they think they’ll need, and even when they “fall short,” people tend to make do with however much they do end up with.)
According to survey findings from Allspring Global Investments, most retirees agreed that they were glad they had started preparing for retirement when they had… but most retirees also wished that they had started earlier. Turns out humans are a tricky bunch to satisfy!
Retirement is such a huge topic, and our emotions around it can affect how willing we are to take a closer look at our situation. We don’t need to let fear call the shots, however. Avoidance is a survival skill, not a “thrival” skill.
“Being clueless about money is no longer affordable,” writes Kate Levinson in her book Emotional Currency. (Ouch, right?) But Levinson points out that this challenge is also an opportunity: any day is a great day to get started.
Not only is it never too early to get started, it’s also never too late to get started. Ever ripped off a Bandaid or taken a flying leap into the deep end? Ever opened that email or that bill you were dreading?
Ever crossed a finish line after you thought it would be impossible to even get started? In the face of the unknown, it’s easy to let fear tell us stories about how hard things will be. We don’t have to accept the first story our fear tells us.
Instead, let’s let the journey be as pleasurable as it can be. We can embrace this very moment as the best possible one to take the next step. It’s never black-and-white. Sure, maybe we could’ve started yesterday, and after all, there’s always tomorrow.
But it’s also really nice to be here with you, today. Call or email us, any time.
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Clients, since becoming an SEC-facing Registered Investment Advisor, we’ve been bulking up our in-house processes. There’s more documentation, but there’s also more intentionality: we have to know what we’re doing and why.
You’ve probably heard it before, but we often talk about our work in terms of three key activities. The first, of course, is the work we do with you. We meet, we talk, and you let us get to know the story of you. The other two are investment research and portfolio management. With the increasing wealth you’ve brought to us, these activities are more important than ever.
So what’s included in that work? Here are some of the things we like to think about (which means you don’t have to!).
Trying to discern which daily or weekly or monthly events are most relevant to the long run. Not all “market moves” are created equal. Movement can come from investors’ expectations for and reactions to even the littlest of day-to-day events. How do we recognize which will matter in the next year, five years, or fifty years? We try to learn from history; we try to understand where things might be headed next. (And, spoiler alert, our choices are rarely driven by knee-jerk reactions or TV news). We do our best to bring some perspective to our choices.
Managing the players in our investment universe. Companies come and go. They can split. They can consolidate. Some industries are seasonal or cyclical; some do better in tough times, and some boom when others do. Part of our work is keeping an eye on the wider investment universe as well as our active lists. We’re always monitoring some number of prospective players who haven’t quite made the cut, watching for the moment they might reach bargain status. Doing our own analysis is crucial before a holding gets promoted to the Buy List, and even then, we’re always reviewing our criteria as a team as each holding’s story continues to unfold.
Finding and following patterns and changes in our everyday lives. Investing, for us, is not about what’s happening in boardrooms around the world. It’s more about what’s happening in our backyard—and yours! “Your money, your life” is about how you choose to save and spend your resources but also about connecting your money to the real life you lead. What does it mean to own a piece of the action? Well, it means that we pay attention to what we’re seeing in our real lives today and try to imagine the advances and opportunities of tomorrow. Here’s a taste of the research questions we’ve been asking in recent years:
There are, of course, other pieces that are just part of the research process. We try to practice good humor and compassion, to sprinkle in some folksy metaphors—and to bring our enthusiasm!
And while there’s no sense in trying to put a value on any of the individual line items discussed here, we do think they’re worth mentioning. We love to work hard for you, and with you.
Thank you for joining us. Reach out, anytime.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is not a guarantee of future results.
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What would happen if flowers bloomed all hours of the day, every day of the year? Would we still appreciate the beauty?
Humans and plants have one thing in common; we can’t be at our “best” every single day. We struggle, we grow, and when we bloom, it is beautiful. We are allowed to give ourselves some time to produce new fruit.
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We believe in saving for the future, but the present is where we live. Your retirement flow might go toward any mix of spending: cash for bills, a stash for unexpected events, or maybe it’s for that adventure in the Florida Keys! None of it takes a pile of money: instead, we tend the orchard for the fruit crop.
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One of the few childhood pictures of me shows a happy baby. My sister says I’ve always been a happy baby. Optimism has been a lifelong trait, for sure.
I can’t know what delighted me all those decades ago, when the photo was taken. But when I survey my finances these days, I still feel the same way the baby in the photo looks.
I like what I own—percentages of ownership in a couple dozen companies. Iconic names, dominating their sectors. Some companies that are working to sort out the future of their industries, which are in flux. A few enterprises in lines of work that did not exist when I was young. The largest player in a fragmented, but consolidating, industry. Producers of vital materials for the age we are in.
These diverse firms have one thing in common: our research team believes their shares of ownership may be more valuable in the future than they are today. No guarantees, of course.
What I own is only part of it. How I own is another key. With a large fraction in a Roth IRA, gains are free of tax as they compound, when they are taken out and spent in my real life, or when left to people or causes I love. All the income tax freight was paid in advance for all time, on those smaller balances I converted to Roth—not the compounding tax-free wealth I now own.
And really, all of that is the proverbial cherry on top. The greatest source of my joy arises not from what I own nor how I own it: the knowledge that my resources exceed my needs, that’s the big thing. It was not that way when we started out, was it? Now, I have enough.
A dear friend once related to me what Grandma always told her: “I have enough, and enough is as good as a feast.” I love this thought.
Oh, my holdings go up and down too, just like yours. Sometimes a company we own messes up. But we know how this works, don’t we? We believe our principles and persistence will get us through, and knowing that is another source of joy.
Clients, if you would like to talk about what you own, how you own it, or what makes for enough, email us or call.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.
A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
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The object of our work can be distilled into four words. Half of them have nothing to do with saving more, investing more, or putting off pleasure today in order to have more wealth tomorrow.
Invest wisely, spend well.
We’ve seen the dreary advice, no matter how much you are saving, to always be saving more. Some of you have told us about “advisors” who discouraged withdrawals from investments for any purpose, no matter how worthy.
What’s the point? As one of our clients recently told me, “I’m not living my life to make my kids rich.”
Invest wisely, spend well. We each know what spending well means in our own lives. But the reminder is that we’re not investing wisely in order to have: we invest to be able to do or be something different, to work differently or live differently.
These two facets of our work interact with each other. If we invest wisely and thereby increase our investment returns, we do not need to put away as much money each month in order to reach a sense of financial security “some day.” So investing wisely may give us more flexibility to spend well, even during our so-called wealth-building years.
Some advisors start with your pre-existing attitudes about “the market” and serve you up a lower-performing portfolio if you come in with any fears about volatility. We, instead, strive to work with people who were either born with great investing instincts or can be trained in them—in how to invest effectively for the long run. We believe this means, hopefully, obtaining higher returns by enduring the wiggles of the market, not pandering to fear of volatility.
This is what we do at 228 Main.
It’s not for everyone.
But if you can “invest wisely,” you may have more money to “spend well”—both now and in the future.
Invest wisely, spend well. Clients, if you would like to talk about the balance of these concepts in your life, email us or call.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is not a guarantee of future results.
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