I have been teaching, advising, helping, studying and investing in and about the financial markets for more than thirty years. The single greatest challenge has been getting others and myself to be explicitly honest about what we want from investing. The simple answer is always, “to make money” or maximum performance.
But, the reality is it all goes deeper than that. Greed only lasts for so long and besides the market is one of the lowest returns on investment relative to the risk taken. Starting a business offers the highest rate of return if it is successful, but you would have to say the same thing about investing in the financial markets. You make money or a reasonable rate of return if you are successful.
This begs the question again, what do we want from investing our money? The older I get the more honest I become about this process. I want lifestyle! Plain and simple. I want to put my money into investment that will help me maintain the lifestyle I want to live without having to work for money to maintain my lifestyle.
No matter how many times I have said that over the last three years I still get blank stares and smirks from those I teach or talk with about money management. Why? Now that, I don’t have an answer for… I have some conjectures like don’t believe it, but no real valid answers.
I have spent many years asking myself this question over and over until I came up with the above answer, LIFESTYLE. It has haunted me that so many people would spend so much time studying, researching and developing investment strategies. For what? To beat a market that for all practical purposes seems rigged? Do we really believe that beating the market is what this is all about? Are we so vain that it is important to tell others that we beat the market? Who really cares?
I live in a condo building with five other units that house people that are extremely wealthy. At cocktails a few weeks ago in conversation I was asked, Jim, how are you doing versus the market? My reply was… “I have no idea! But, as far as my lifestyle… I get to stay in the condo for another twelve months. I made enough in my portfolio to pay for the next twelve months of living expenses.” They just laughed. But, I was serious!
Investing isn’t a game, it isn’t about beating anything, it is about being king of the mountain by having the best performance, it isn’t about building the best mouse trap for managing money, it is about putting my money in investments that allow me to no longer work and still maintain my lifestyle. Some call that retirement… I call it LIFE! Living it and enjoying every minute of it according to my ambitions.
I asked someone recently who had sold a business and received $30 million, “why not buy and ladder treasury bonds with a yield of 2% and live on the interest?” The reply was… “That is the dumbest thing I have ever heard of!”
My response, “Okay, why not ladder insured municipal bonds with a yield of 2.3% tax-free and live on the interest?” The reply was… “have you lost you mind?”
My response, “you said, having sold the business for so much money now you can relax and enjoy your life… travel, spend time with the kids and grandkids, etc. right?” Yes was his reply, and then I said, “then you have lost your mind! Why worry about markets and risk when you can have a guaranteed income and do what you stated?” … he is still thinking about it!
We loose perspective is my rambling point. We lose sight of what we want. We lose touch with reality of what it takes to have what we want. We always believe we have to have more, do better, outperform, and on and on it goes. It isn’t about performance to me, it is about LIFE.
What I want is lifestyle. I cannot speak for anyone else. Chasing butterflies while riding on a unicorn (my analogy for wanting to outperform the markets.) is not always the best course of action. If that is what you want to do, by all means pursue it, but at some point you will return to reality and understand this is about LIFE not performance.