Good afternoon,
The saying goes that hindsight is 2020. Well now 2020 is almost hindsight. Thank goodness. It will be nice to put this year into the rear view mirror and move on. Have you done your planning for next year yet? Me neither, but I’m working on that now.
The WMR had a birthday this week, though I’m not really keen on celebrating birthdays. I prefer the old Mark Twain saying that “Age is an issue of mind over matter. If you don’t mind, it doesn’t matter.” And my readers know that a big interest of mine is anti-aging and longevity, so I fight aging every step of the way. In fact, chronological age is not that important. All it really signifies is how many times you have circled the Sun. More important is your biological age, which refers to the age of your body and your organs and cells in your body. Here is a discussion of biological age v. chronological age, https://bengreenfieldfitness.com/podcast/self-quantification-podcasts/epigenetic-testing/
Of course, the longer one lives, the more it’s going to cost so financial longevity is important too.
Those who know me well might argue that I’m not one who’s known to “act my age” most of the time either. And apparently every car dealership I’ve ever visited has a birthday database because I got more of those notes than would seem necessary.
“Mike, give me a call, this can’t be right….this statement says that my performance this year is only 1 point something per cent. I find that hard to believe.”
Was a voicemail I received last week.
When I called back, I was also sent to voicemail. Send me a copy of exactly what you’re referring to. I’m sure I can explain it. So the client sent me a copy of his statement.
Sidenote, I will often request exactly what someone is referring to so that I can see precisely what they see. Sometimes the resources that I use internally for client information are not the same things that go out externally so to answer someone appropriately, I need to know what they’re seeing.
Sidenote sidenote, I will often request similar proof when someone tells me that their brother in law made “way more money in the market than I did.” Sure, just send me copies of his statements and/or his tax return so I can see what he’s doing. Such a query usually ends that discussion.
Anyway, in this case, the client was absolutely correct. On his statement it showed his “personal rate of return” as 1.22% for 2020 through September. I confirmed that for him. Then I ran his performance report for 2020 through the end of November and the number came back at 11.39%. Which I sent him. “Wow, that sounds better.” Yes it does.
This sort of communication isn’t even a little bit unusual. And it illustrates why I very rarely ever mention performance because over most time periods, especially short ones, it doesn’t matter. What makes calendar year performance the yardstick? We could measure from 4th of July to 4th of July or Masters weekend to Masters weekend or some other irrelevant time period. What matters is that you don’t run out of money before you run out of time.
It also goes to show how impossible it is to time the market. If this client had called in early October after receiving that statement and said “this is terrible, get me out,” he would have missed all the recovery over the next 2 months. Just like if you had gotten out back in March when the world was ending this most recent time, you would have missed the rapid recovery which happened in short order in April. Of course, my clients are more well informed and more well behaved than others so they don’t panic. And if they start to panic, I expertly calm them down. As I’ve often said, I’m more of a behavioral coach than a finance guy and sometimes that means protecting investors from themselves.
And speaking of arbitrary time periods, did you know that because November has ended, hurricane season is now over?
Oh, is it? Because Mother Nature goes by our Gregorian calendar? Call me cynical, but doesn’t that seem to be an inordinate amount of hubris for humans to think that nature works by our rules? I think it might actually be the other way around.
Another client called recently and phrased a question in a very interesting way which made tons of sense to me. “Mike, you know I’m a golfer, right?” Yes, I do know that. “So let me put this investment question in golf terms.”
Ok.
“I play golf and I invest. When I play golf, if I hit a ball out of bounds, I get a penalty. When I invest, if I hit it out of bounds, I don’t want a penalty. Can’t we do something like that?”
Hmmm, why yes, yes we do have investment programs that don’t penalize you for hitting it out of bounds, and I like the way you phrased that. May I use it for the WMR?
“Sure.”
Have you made your Christmas list yet? Will Santa come this year or is he afraid of covid? By outward appearances, it seems he may be in one or more of the higher risk categories so I guess you couldn’t blame him if he just ships gifts this year and doesn’t actually make the trip in person. I ask my kids each year what they want for Christmas. The oldest one says he’s too busy with finals at school right now to think about it. Fair enough. The middle one says she’s busy applying to more schools but did come up with a couple of items. When I ask the youngest child what she wants, she answers “I put everything in your Amazon cart! All you have to do is click ‘order’!” Perfect, thank you. Unsurprisingly, she gets pretty much what she asks for. And as a quick reminder, if you use Smile.Amazon.com rather than just Amazon.com, then Amazon will donate a small amount (I think it’s about ½ of 1%) of your order total to your favorite charity. You pick the charity, order from Smile.Amazon and the charity benefits. If you are so inclined…
This week’s chuckle is not new math, but old math. Here is proof that 13 x 7 = 28. https://www.youtube.com/watch?v=MS2aEfbEi7s
Safe for work. And safe for students and teachers as well.
LF26 – “There are two great days in a person’s life - the day we are born and the day we discover why.” – William Barclay.
Have a great week and stay healthy.
The opinions expressed are those of Michael Acho and not necessarily those of Lincoln Financial Advisors Corp. CRN-3364110-120920
Michael J. Acho, MBA, CFP®
Private Wealth Advisor
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