I’ve spent the past 17 years giving financial advice to investors across the country grow and protect their hard earned wealth. Such an enormous responsibility is challenging enough in normal economic times. Today it often feels like an impossible task. Markets have become increasingly more volatile, economies more fragile, and governmental intervention in both have become more widespread as central bankers across the globe attempt to manage our current predicament.
With so much uncertainty today it’s hard to even call what I do investing anymore. I prefer to think of what I do as navigating people and their lifestyle dreams through a seemingly endless amount of potential financial mine fields. As a Certified Financial Planner™, about the only thing I know for certain is just about every assumption I might make in planning for my future will be wrong. On the surface this might seem like something to fear, but I’m going to devote this article to convincing you it’s something to embrace.
Eisenhower once said, “Plans are useless but planning is invaluable”. Perhaps what he meant was that while the assumptions we make about our future may fail to materialize, there is a great deal of value in having gone through the exercise. Planning forces us to consider all of our options. Having invested two decades of my life in trying to make sense of our nonsensical world, I can only hope that some of the insights I have managed to discover might be of use to you as you embark on your planning. The following thoughts contain the best advice I can offer someone trying to negotiate all of the uncertainty today. I hope these ideas help you better plan for the future you deserve.
1. Diversify everything and everywhere – When the future is uncertain the only prudent investment response is to diversify. Diversify across investments, asset classes, tax liability, and investment philosophy. Manage risk for the world in which we live and not the world in which you think should be. The greatest risk any investor takes today is basing an investment decision on a belief, ideology, or dogma. The world is full of a lot of opinions, and nobody has a crystal ball…NOBODY
2. Invest in yourself – The greatest asset any individual owns is their ability to exchange their own unique talents for an income. Don’t fear change and get out of your comfort zone once in a while. The world is changing faster and faster. This can be a frightening thing or it can be highly exhilarating. How you view it will determine your value.
3. Never stop learning – 2008 had a significant impact on me personally. In this one year I experienced the tremendous joy of becoming a parent and also observed just how fragile our economy was as I navigated my clients through one of the greatest systemic risk events in the history of western civilization. The events that unfolded forced me to ask questions about the way our world works and the assumptions I was making about it. Before investing a dime of your money back into society understand how society works.
4. Question conventional wisdom – Before indebting yourself heavily through the purchase of a large home or an expensive college education make certain you have carefully gone through a thorough cost benefit analysis of your own. Affordability requires a deeper reflection than whether current cash flow is adequate. Think big picture and think long-term. One of the largest culprits to the 2008 financial crisis was our collective addiction to leverage. Live within your means.
5. The only true authority is you – With hurricane season upon us we are reminded of just how fragile our coastal existence is. Regardless how helpless we feel when confronted with the humbling effects of Mother Nature or the ramifications of enduring an economic crisis of man’s own making, individuals will always be in control of our own future. We learned in 2005 how to live smarter by accepting the risks we were assuming. I’ve observed that far too many investors haven’t made similar adjustments for the risks associated with their investment portfolios. Invest different!
Socrates once said, “I know that I know nothing, but the others don’t even know that”. I suspect he was trying to say that there was a great deal of wisdom in simply accepting and embracing uncertainty. Predicting the future is the task of the fool, but that doesn’t mean you can’t actively plan for the way it might unfold. While the world in which we live is far beyond our ability to control, we will always be able to control how we manage and react to the actions of our lives. Good luck out there and invest wisely.