Today is my birthday; my 40th birthday, in fact. It’s a big milestone, and I don’t feel different. There is just a four in front of my age instead of a three now. However, I can say I feel wiser. I have learned a few things in my years, especially during the last 13+ at KWB. So, as I near my 40th birthday, here is a collection of 40 thoughts, quotes, and values I want to share.
1. Diversification means accepting good enough while giving up great but avoiding terrible.
2. Diversification means you will always dislike something in your portfolio. If everything is going up, you are not diversified.
3. “Keeping up with the Joneses” is the easiest way to stay poor.
4. Ask a millionaire if they feel wealthy and they will likely say they need to double their wealth before they feel rich. Ask them again once their wealth has doubled; they will say the same thing.
5. Building on the last point – omit FOMO (fear of missing out) from your life. Having this skill will be the ultimate superpower for you.
6. Part of the trouble for investors is that they think investing should be exciting. Gambling is exciting (and unpredictable). Investing is boring!
7. If you remain focused on getting rich slowly, you will beat 99% of those who try to get rich quickly.
8. When it comes to investing, starting young is the greatest thing you can do for your older self.
9. If you are married, 65 years old, and both healthy, there is a 50% chance that one of you will live to 90 years old. Therefore, always have some money invested for the long term.
10. Warren Buffet made 96% of his net worth AFTER his 65th birthday. Compounding is incredible; time matters more than you think.
11. Did you know people will pay four times more for a lottery ticket if they can pick the numbers, as opposed to a ticket with randomly selected numbers (as if they can control the outcome)?
12. Too many people try to control their investments. Time and temperament are two things you can control. Focus your energy on those.
13. The biggest decisions in life (who you marry, buying a home, etc.) are things you do once, twice, in your lifetime. This means there are few people in your life who can teach you how to make good decisions when it comes to those topics.
14. From Morgan Housel: “You should obsess over risks that do permanent damage and care little about risks that do temporary harm, but the opposite is more common.”
15. It is amazing to me how people will listen to someone trying to forecast the future when that person has shown no ability to forecast the past.
16. If you read an article on a topic you are familiar with you can typically pick lots of holes in it. However, if you read an article on something you know nothing about, you assume it is 100% accurate. Consider this the next time you are reading or listening to something.
17. Most people are going through something that you may not know or understand. Expressing empathy can go a long way for them.
18. Every past decline was an opportunity, and yet, why does every future decline feel so awful? It pays to be an optimist.
19. The best thing you can do with money is to give yourself control over your time.
20. Life comes in waves. When one terrible thing happens, it feels like many other terrible things start to happen all at once. The same goes for good things. It is mostly somewhere in between, but it sure feels like a tidal wave.
21. Another one from Morgan Housel: “Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works.”
22. From Napoleon: “The man who can do the average thing when everyone else around him is losing his mind is a genius.”
23. One of the biggest mistakes I see most often is reacting to what someone says without much knowledge about what they are doing and why.
24. The time we are living in is exponentially better than that of people just 100 years ago.
25. Infinite knowledge, news, and opinions at our fingertips is incredible, but it can also be very unhealthy at times.
26. Luck is not given enough credit in our lives. We tend to give ourselves credit for things when luck or circumstance plays a much larger role.
27. Forecasting the future is incredibly challenging. At the beginning of 2022, the Federal Reserve thought they may hike rates one or two times throughout the year to 0.5%. Instead, they hiked to 4.5%.
28. Yet, the market hangs on every word Fed Chairman Powell says like he knows something we do not.
29. Interest rates matter a lot. How much it costs to borrow money affects everything in an economy.
30. Investing without a plan is like driving across the country without directions. You will get to the other side, but you might end up in Miami instead of New York. Have a plan.
31. Spending money on things you enjoy (for me, bourbon and golf) is always worth it in the long run.
32. To afford the things that are worthwhile, you need to cut spending in areas that are not.
33. Expect to live through a bear market/recession once every five years or so. Best to get used to it sooner rather than later.
34. If you are buying individual stocks, there is a remarkably high chance that the person selling the stock to you or buying the stock from you is a professional money manager/trader. Do not day trade.
35. Travel more and do it now. Why wait if you have the means?
36. If you don’t understand it, you shouldn’t invest in it. Invest in a diversified basket of stocks (ownership of companies) and bet on the ingenuity of those companies instead.
37. Don’t mistake confidence for intelligence. You know who has a lot of confidence but not as much intelligence as you would hope? Experts give their opinions on television.
38. A loss hurts twice as much as a gain feels good. You need to know your risk tolerance and risk capacity to be a successful investor.
39. Past performance is not indicative of future performance; past behavior is.
40. “Easy money” has never just been made. Investing is difficult. You’ve earned your gains.
As for a 2023 Outlook, LPL’s Outlook is posted on our website under the Resources tab. Our KWB Economic Outlook is in late January. The webinar will be hosted on January 24th and our in-person seminar in the Redlands office on January 25th. If you or a friend would like to hear our thoughts on the coming year, we encourage you to attend our Economic Outlook.
As always if you have any questions, please contact us, and stay safe.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
Investing involves risk including loss of principal.
No strategy assures success or protects against loss. The economic forecasts set forth in this newsletter may not develop as predicted and there can be no guarantee that strategies promoted will be successful.