Chasing Fool’s GoldMonday, September 15th, 2008 by Charles Mayfield, CFP®
In the wake of the recent Olympic Games, I’m inclined to draw on the parallels between those fantastic events and the ‘not so fantastic’ events that have unfolded in our economy lately. Coincidently, this happens to be the time when Cass and I are sitting down with our clients to review their accounts and asses the most recent quarter.
I ask you this; did your portfolio earn any medals this last quarter/month/year? The Investment DashboardTM that Cass and I developed is used to grade money managers and mutual funds on their performance. This is one of several tools that we employ to help us keep our clients funds on track to meet their objectives.
These athletes that compete at the highest level have been training for years. One of the things I noticed about many of them is that they all dealt with adversity in the past 4 years (since the last games). Now some would argue that 4 years is a long time to train for anything. What about 10, 20 or even 30 years. Imagine for a moment that you train for something 30 years. Do you think that somewhere along the line you would have to deal with adversity? A setback, like setting a time that was not your best, or losing a race you should have won.
I see many similarities in this and our economy at the moment. We are dealing with some setbacks. These are no different than the ones from years past, simply wrapped in different paper. Let’s imagine for a moment that Michael Phelps has an off day at the pool in 2006. He wasn’t eating properly or stayed up late the night before a big race. He goes out and finished 3rd or worse…Dead Last. Does it seem prudent for Mr. Phelps to abandon swimming at that point and try to make the Olympic team running the 100M sprint? I don’t really have to answer that question, do I?
Of course he doesn’t change sports. But why? He stays in the pool because he knows that overcoming setbacks is one of the things we need to do to reach our goals. Understanding these setbacks and what causes them, is one of, if not the biggest, reason we succeed in the future.
Now take your portfolio. Chances are quite certain that you have seen setbacks in recent months. That is absolutely no reason to abandon the investment philosophy and planning that has gone into place. It has become human nature (in so many aspects of life) to crave immediate results. Money management doesn’t work that way…much like training for the Olympics. Develop a plan and stay the course.
Now I’m not going to sit here and tell you that the plan you put in place last year is still a sound plan. Even the Michael Phelps of the world have to change up their training/diet/routine to achieve results. However, changes to your portfolio, much like his training regimen, must happen for good reason, and in most cases, due to some fairly objective research.
Bottom line: quit chasing the winners every time you look at the financial news on TV, in magazines or the newspaper. Rely on the knowledge and experience of a Financial Planner to help guide you to your goals. There is a very good chance that your portfolio may be in line for the bronze this quarter, and you go and muck it up by making changes that weren’t necessary. Let someone help you make sound decisions, with your priorities in mind, and you’ll be standing on that podium when retirement comes knocking.