“Being rich is having money; being wealthy is having time.” –Margaret Bonnano
It is important to take a macro versus micro approach to investments, meaning we have to take a very big, long-term view in order to start to make some sense of the stock market. There are many variables in this equation that we call the market and only by looking at it as we would approach a mosaic by looking back months and even multiple years does it start to make sense.
Listen for more on how to keep perspective when looking at the market.
Watch my short video or read the transcript below.
Hi there. Mike Brady with Generosity Wealth Management, a comprehensive, full-service financial services firm headquartered right here in Boulder, Colorado.
Today I want to talk about making sense of things. I was meeting with a client a week or two ago and he said Mike, it doesn’t make any sense in the stock market. It’s something that I don’t understand. It goes up high one day and down the next day for a reason that I can’t understand. And my answer to him was stop trying to understand it. Stop trying to understand it on a daily basis, a weekly basis, even a monthly basis because I don’t know the future, you don’t know the future and for us to try to guess the emotions, the intents, the actions of millions of other people is very difficult.
We have to take a very big, long-term view in order to start to make some sense of the stock market. If we’re looking at it from a daily basis, one day if you listen to the newscasters or read some article they always have some reason why it went up like they know definitively what millions of people are thinking. The next day it might completely reverse and then they give a different answer that might be very similar. No, not that many people change from day to day. There are many variables in this equation that we call the market and only by looking at it as we would approach a mosaic by looking back months and even multiple years does it start to make sense.
So you have to look at yourself and your own emotions and say wow, am I going to allow myself to be whipsawed from day to day, from week to week, or am I going to take the long-term view. And your bias is very important to know. If you’re a naturally optimistic person I would argue that history has shown you to be a winner in this because three out of four years going back to 1929 the market has been positive. One out of four years have been negative. That doesn’t mean the future is going to be that way. All I can really say is that historically that has been the average when we look at many multiple years, many five-year, ten-year and twenty-year time horizons. Those that are pessimistic and are trying to time the market are worse off than those that say hey listen, I’m going to take a long-term view. On average I am going to be the winner. Sort of like going to a casino and you get to be the house. You don’t get to win every single hand but over time you certainly are the winners.
And so the future is never certain. It could be different in the future but this is what I think would be a better approach for most people.
Mike Brady, Generosity Wealth Management, 303-747-6455. I’m always here if you want to talk. Thank you. Bye bye.
“Learn from yesterday, live for today, hope for tomorrow.” – Albert Einstein
The third quarter of 2018 has already come to a close and as we look forward to the end of the year, I see no reasons to be concerned. While the first half of the year was a little shaky depending on your investment plan, we’ve seen some very positive rebounds that have served as a great reminder to stay the course.
In this edition of my video blog, I discuss the newest piece of the puzzle and why it’s important to remain calm in regards to your financial plan. You don’t want to make short-term decisions for a long-term goal. Keep the big picture in mind, here’s why:
“Success is nothing more than a few simple disciplines, practiced every day.” – Jim Rohn
Investing and life are more like poker than chess. I recently listened to an interview with Annie Duke. Ms. Duke’s book, Thinking in Bets along with the interview really resonate with me because her thinking is quite similar to mine.
In this quick video, I detail the parallels of investing and poker and why it is critical to keep a “poker face,” keeping your emotional composure during bad….and even good investment periods!
About Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts
Annie Duke, a former World Series of Poker champion turned business consultant, draws on examples from business, sports, politics, and (of course) poker to share tools anyone can use to embrace uncertainty and make better decisions.
I like this book for many reasons, the greatest one being the statement, “Even the best decision doesn’t yield the best outcome every time.” In poker, like in investing, you can make the best decisions but there are still unknown elements at play.
Hi there. Mike Brady with Generosity Wealth Management, a comprehensive, full service financial firm headquartered right here in Boulder, Colorado.
Today I want to talk about how investing and life is more like poker than it is chess. I got a lot of these ideas I’m going to share with you today from an interview and a book that I read by Annie Duke. I’m going to put a link in the newsletter and in the transcript of this. (http://a.co/aw2KM5f) Annie Duke, Thinking in Bets.
And when I heard her interview on this podcast it was like she was speaking right to me because that’s the way I think. And so of course I thought she was brilliant. If you watch my videos going back seven, eight, nine years you’ll hear that I talk in well let’s increase our probability of success. And I think the odds are because that’s really the way life and investing is. Let’s think about chess for a second. Chess there’s these pieces on the board and all of them are visible. You see it and so does your opponent. With all that visibility it’s a completely logical game. The person who is the more experienced, the person who is the better player should always win. And if that person doesn’t win then they can go back piece by piece or play by play and say oh, this is where I made a mistake.
That’s not the case with poker. Let’s talk about poker for a bit. You don’t get to see all the cards so there’s a hidden element there. It’s all a bunch of odds. You might have an 85 percent probability, 90 percent. But there’s still 10 percent that you could be wrong. And it doesn’t mean that you were wrong because the outcome went against you. But there were things that you didn’t know. There were unforeseen things and there is luck. I’m not going to ask you to raise your hand but if I was to say who has run a red light, most of us would raise our hand. Even if it’s only once in our life or if it’s once a day. Just because you run a red light doesn’t mean you automatically get hit although it dramatically increases your odds of getting hit. Just like if you’re following the rules and you go through a green light it doesn’t guarantee that you won’t get hit, T-boned by somebody else. So there are factors outside of our control that we have to understand.
When we’re looking at a poker game, a typical poker hand a professional might take two minutes. Therefore, you might have 30 hands in an hour. And a professional poker player is going to know the odds. They have to work really hard to know the odds, play the game, to be cool. Maybe there’s a string of bad luck that you have but you stick to your particular core knowing that you’re a really good player. You know the odds better than the people that you’re playing against and you just can’t get too emotional one way or the other. If you’ve ever seen a poker game nobody’s jumping up and down when they win or at two, three or four hands they’re getting super depressed. Maybe amateurs are but definitely not the professionals.
So investing is very similar. We can do the best that we can with all the different variables that are known to us we can come up with a strategy. We can say wow, I think the market is going to do this, I think the market is going to do that. And we could be wrong because there are going to be things that are unforeseen that are going to be in the future. Nobody knows the future. So that by definition is going to be a variable that we’re not able to account for fully. Therefore, what do we do? What we do is we, of course, look at a diversified portfolio. We say well how can I not stick my neck out so much that if that 10 percent or that 20 percent or whatever the number is that I’m wrong, I’m really stuck that I’ve lost so much. How much are you willing to risk? So a diversified portfolio is very, very important. Staying in it for the long term. If you find your strategy that works with your risk level, your tolerance, that allows you to stay emotionally cool it’s got to be a long term. If you were a poker player it might be many hours. If you are an investor it should be many years. And so you’ve got to keep that in mind as well.
Life is full of unknown variables so we try to increase our knowledge. We try to increase it so we can make the best decisions. We try to learn from those decisions as well. It is not a chess game. It’s not a guarantee. So if you’re looking for a guarantee then investing in life, you know, you’ve come to the wrong place so you’re never going to get that and you’re going to be continually disappointed.
Mike Brady, Generosity Wealth Management, 303-747-6455. You have a great day. Thanks. Bye bye.
“Our greatest glory is not in never failing, but in rising every time we fall”
– Confucius
The last few days have seen lots of headlines and news about the markets, and you may be wondering what this all means.
History has shown that investors are rewarded for steady nerves and long term vision. If you’;re in your 60s and 70s, hopefully you still have many years in front of you, so your vision should be long term.
Volatility is normal, and the low volatility we’ve seen in the past few years is the exception, not the norm!
Click on the special video for my up to date thoughts.
“Happy Families are all alike; every unhappy family is unhappy in its own way”
– Leo Tolstoy in Anna Karenina
There is plenty to be happy about this year, as almost across the board the unmanaged stock and bond market indexes were up. International markets as well.
I get asked all the time “when is the market going to crash?” and “how bad will it be?”. They’re the wrong question.
And I use an analogy of a marriage and disagreements to make my point.
Below is my end of the year video, where I outline my thoughts on 2017, and also what current conditions might mean for 2018.
I highly recommend you watch it, and if you have any questions, please don’t hesitate to give me a call. I’m here to help and serve.
