One of my kids asked why it is so difficult to get good people to run for president. I responded that there were probably multiple reasons but one might be that if you put anyone’s life under a magnifying glass, you are likely to find a lot of things that you did not want to see.
This was brought home to me the other day in a most unusual way. Launa returned from shopping, so pleased to have found the perfect vanity mirror for her make-up table. It is one of those magnifying ones that has a bright light so you can see your face up close, and very clearly.
Having never used one of these mirrors before, I decided to give it a try. Sitting down in the chair I turned on the light and had a look at my face. Launa is probably still laughing at my shocked reaction to seeing my face so magnified for the first time. Noticing all the flaws and blemishes I quickly pushed the mirror away and exclaimed that some things were never meant to be seen that close-up. I wondered how anyone could ever be pleased with their appearance if they looked at themselves in one of those mirrors.
As I pondered the concept of looking too closely, I felt a flood of understanding pouring through as I realized in many areas of our lives, we look at ourselves too closely. We focus too often on all the little flaws, and in so doing, miss the big beautiful picture. Like a wonderful painting, life is made up of tiny, insignificant, and often unappealing brushstrokes, but step back just a bit and a beautiful painting emerges.
I have tried much of my career to help investors view their portfolio as a single big picture, rather than focusing on all the little, often imperfect pieces. A properly diversified portfolio is designed to create financial balance, and balance implies that some things will do well under conditions where other things may not do so well. Ironically, in a properly allocated portfolio, there may never be a time when all investments are performing as you would like. The point of diversification is to create balance that results in accomplishing your overall goal.
For most people, the goal of a portfolio is to provide a reasonable rate of return over the course of life, during good times and bad, with an acceptable level of volatility. Whether a couple of your dozens of investments are up or down at any point in time is not important. What is important is that the portfolio as a whole is fulfilling its purpose. If we obsess with getting out our financial magnifying glass and focusing on finding the flaws, we will forever be selling, changing and being frustrated with the investments that we have.
When evaluating your life, your investments, or even your face, put away that magnifying glass and step back a little. You may then find the big picture looks a whole lot better.
A local team played a tough football game last week that was ultimately decided in the final two seconds as two players pushed against each other, one foot from the goal line. Because of that single foot, and those two players, one team walked away cheering themselves the winners. The other team hung their heads in defeat. That one play resulted in hundreds of thousands of fans spending the weekend either in celebration or discouragement. Silly as it may sound, had that single defensive player lost his footing, the outcome for the teams and their fans would have completely changed. In the end, one team was nationally praised for its courageous win, while the other was dropped from national rankings, all over two players fighting for two seconds, over one foot.
It is said that the doors of history turn on very small hinges. That is certainly true of the outcome of many football games. A three hour competition is often decided on a single play, penalty, or mistake. In many ways, coming off the winner comes down to luck on any given day. So what separates the great teams from the not so great? All athletes know that sports involves its share of luck, but they also know that those who are the most prepared, are lucky more often. Great teams will not win all their games, but over time they will win most of them.
Investing success also turns on small hinges. The outcome of any single investment is never assured, and investors, like athletes, understand that losses happen. But investors also understand that those hinges will turn their way more often if you are prepared. Athletes prepare for a game by focusing on fundamentals. Here are just a couple of the fundamentals that can help an investor to prepare:
1 – Invest consistently every single paycheck of your life, no matter how small.
2 – Invest in what you know, or what your advisor knows. Avoid that which is not easily
3 – Don’t try to get a higher return than is reasonable. If you want to gamble, go to Vegas. 4 – Formulate a long term plan for success and update it regularly.
5 – Understand that all investments have their place, but not all have their place in
your portfolio. What is good for your neighbor may not be good for you.
6– Admit your mistakes and move on. Don’t try to save a bad investment by buying more
7 – Avoid investing decisions based on dramatic current events, like elections, terrorist
attacks, weather disasters and scandals. The passage of times brings things into
8 – Be highly suspicious of investment pitches that are emotionally based.
9 –Always live on less than you make.
And finally, don’t take it all too seriously. It really is just a game, or just money. If you stick with the fundamentals, the small hinges that turn your life will more often than not, turn in your favor.
Every chance I get I turn to the obituary page. I believe that anyone who goes through all the trouble to struggle through this life, deserves to be recognized for having done so. I look at each picture, read each name, and glance through the always positive words describing their life. Reading the obituaries is a reminder of our own mortality, since no matter our circumstances in life, each of us will one day find ourselves listed there.
We try to prepare for that dreaded day by dutifully creating wills and even trusts, as the experts tell us to do, but my real life experiences in dealing with grieving families have taught me that these are only the basic necessities and often fall woefully short in preparing heirs for the day when everything in your life will suddenly be dropped in their
In helping people prepare for this inevitable event I encourage asking many questions about your life, the same questions a mourning child will be asking in the day when it falls to them. Where are your bank accounts? What bills do you pay, and are they automatically drafted? What properties do you own and are there any lienholders? Do you
have life insurance, annuities, brokerage accounts, or other investments? Who do you owe money to, or who owes money to you? Do you have subscriptions to be cancelled? Who are the key people in your life such as your accountant, lawyer, financial advisor, religious leader or special close friends who would need to be contacted?
Where do you keep all your personal documents, credit card information and tax information, which your heirs will need to assemble to file your taxes. What are your passwords to access internet accounts? Do you have gold bars, cash, weapons or anything of value hidden somewhere? Do you have a collection with the name of a person to call who can help properly value it? Have you specifically promised anything to anyone such as the child who thinks they are getting that grandfather clock?
If you spent an entire day, you would keep coming up with more questions. I have spent many hours with distressed heirs who say, “I wish mom would have told me more.” After you ask and then answer these questions, write it down. I keep a special file my kids are all aware of that lists the answers to these questions and many more, and I update the file regularly. I cannot prevent the headache of an heir managing my estate, but I can do a lot to make it easier on them.
Children don’t like to talk about their parents dying, preferring to pretend that you will live forever. Don’t let them push you off. Insist on having this very important conversation so that when death comes, and it will, they will be able to spend more time celebrating the life you lived rather than spending all their time struggling with the messy details left behind.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 1173 S. 250 W. Suite 505, St. George, UT 84770.
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