Heard on the Street…

True story: this week my 7-year old son and I were driving home from church in a silent truck.  Then, all of a sudden, he yelled out “Everybody knows that!”.   Of course I replied asking, “Everybody knows what?”  His answer: “In 15 minutes you can save 15% or more on car insurance.”  Admittedly, this was not quite what I expected.  Then a few seconds later came his follow-up, “Dad, what’s a percent?

Many times we believe something just because we hear it over and over, regardless of whether we fully understand it or take time to research its validity.  Believe it or not, this happens in the investment world as investors buy into the “hottest stock tip” or become frightened after listening over and over to doomsday predictions.  Regardless of their specific situation or well developed plan, it somehow becomes easier to stray off path when the “noise” gets louder – whether from family, a friend’s so-called “successful investment story” or the news and media.  Remember, you must maintain faith in your plan.

Playing the “what-if” game can be dangerous just like following the latest trend can leave you at risk.  There’s a time to turn down the volume… and when things seem just too good to be true, don’t hesitate to ask your advisor.  It can be good to get a second opinion or an objective viewpoint before making a clouded or emotional decision that you come to regret down the road.

Balancing Act

Chuck Swindoll once said, “The longer I live the more I appreciate balance, and yet the more I see of extremes.”  Most of us do appreciate balance.  And most of us do see the extremes around us because they typically reveal something unexpected, or perhaps even dangerous.  This naturally grabs our attention, at least for the moment.

As an investor, you have likely experienced times when the market seems to be overreacting to something.  During these times it’s often best to step back and turn down the volume on the TV set.  Remember, if you developed an investment strategy and the appropriate level of risk tolerance in your plan, then you’ve already prepared for extreme times.  In other words, you have “balanced” your portfolio based on risk, goals and time horizon.  This balancing act can help you get through these times with a degree of confidence that comes from being prepared.

And don’t forget, just like in life, we need to “rebalance” our investments from time to time.  When your situation changes, or as you get older, you will likely change your goals and adjust your risk tolerance accordingly.  Don’t fail to consider key changes in life and in turn adjust your investment portfolio.  A periodic rebalancing can help smooth out the bumps in the road and help to keep you on track.

Long-term perspective: Essential for athletics and investing

Good insight from Steve Holman of Vanguard that gives a view on maintaining a long-term perspective and the importance of delaying gratification.  He also reminds us that “doing the right thing means having clear goals, choosing the right balance… and investing for the long term.”

Long-term perspective: Essential for athletics and investing

If you’re looking for insight on investments and personal finance, you could do a lot worse than asking a long-distance runner.

Vanguard is a second career for me. After college, I had the great fortune to compete as a professional distance runner. Yes, there are such things as professional distance runners; however, our rewards tend to be more spiritual than financial. After participating in the Barcelona Olympics for the United States in 1992, and competing across the globe as a world-ranked miler for almost ten years, I “retired” at the age of 31.

Whether you’re 31 or 65, retirement isn’t an easy adjustment. Many of us experience a profound sense of nostalgia and melancholy for our former lives. We worry about what lies ahead. Like many retirees, it took me a while to figure out my next step. Ultimately, I decided to go to business school.

While I had been a Vanguard client for a number of years, making a career here was never a serious consideration until I spent time here as a summer intern while I was in grad school. As it turns out, many of the defining characteristics of my athletic career directly linked to Vanguard’s investing philosophy.

Long-term perspective: Distance runners know that success is never a product of a single run; it’s the cumulative effect of remaining committed, consistent, and focused over a long period of time. At times, it’s hard to remain diligent for a benefit that seems so far off in the future, but the rewards when you achieve these goals are immense. Investors, too, are often rewarded for remaining disciplined and maintaining a long-term perspective.

Delayed gratification: Getting up at 6 a.m. to jog isn’t “fun.” Pushing through the last few miles of a tough workout is rarely enjoyable. Runners know that you have to make choices and sacrifices in the short term if you hope to improve fitness over time. Putting money away in savings means you’re not consuming something cool now, and that can be tough. But a less expensive car now could mean a happier retirement later.

No quick fixes: I’m proud to say that I never used performance-enhancing drugs during my athletic career. I could have doped and run faster, maybe even got away with it, but it wasn’t the right thing to do. Instead, I got up every morning and put in the miles, year after year. It’s easy to be seduced by portfolio-enhancing alpha strategies and esoteric alternate investments. Occasionally these things work in the short run, but usually they don’t, and sometimes people go to jail. Doing the right thing means having clear goals, choosing the right balance of low-cost funds, and investing for the long term.

And as I learned long ago, hard work gets results—even when you can’t see the finish line.

Remember to “like us” on Facebook to keep up with our updates as they are posted!