JUST PLAIN TALK: What is the highest dividend available to you?
COVID-19 knocked out in-person events all over the world, but people adjusted. In place of the National Association of Personal Financial Advisors' Southern Symposium, we got a copy of "The Psychology of Money" along with a Zoom presentation by the author, Morgan Housel.
The soiree traditionally is on Georgia Tech's campus. For me, it was a win-win, I got one of the best financial books ever written, and my eyes could avoid Tech's mascot, Buzz, spelled incorrectly, I might add. Here are some tidbits I gleaned from Housel's book and his presentation.
There's much chatter about how a band of unsophisticated neophytes at Robinhood humbled a mighty hedge fund. It's a classic underdog story, David versus Goliath, but it's not outside the realm of possibility for anyone. Spend less than you make. Save the difference. Have a diversified portfolio, then be patient. Of these four, the last one, patience, is most critical. Without it, everything falls apart. Patience is a virtue. Mutual fund managers and hedge fund impresarios have to answer investors quarterly. However, individuals playing a decades-long game can succeed. "The single most powerful thing you can do is increase your time horizon," Housel wrote.
Successful investing has more to do with how you feel about money rather than how smart you are. As Ray Wylie Hubbard said, everybody turns a bad trick now and then. Sometimes luck throws you a curveball you can't reach. Risk can be hard to identify. Don't regret decisions that perhaps seem bad in retrospect. If something is risk-free, either the return is low, or someone is lying. But risk can be your friend because, over time, it pays off. "You can be wrong half the time and still do great," Housel told us.
The financial world hides costs; it's better today than 20 years ago, but still. Stock trades on Robinhood have zero commissions, but they aren't free. Brokerage firms pay Robinhood, who then route the orders to get the better price and pocket the difference. The travesty is zero commissions increase activity and incentivize day trading, a strategy fraught with peril and among the world's worst investment strategies. Costs don't always sport dollar signs either. Look at uncertainty, doubt, and even regret as the cost of admission in the investing world.
Time is money, and money allows you to control your time. The highest dividend, Housel noted, is the ability to do what you want to do, when you want to do it, and for as long as you choose. Throw in spending your time with who you like, and you've got a gold mine, figurative or not.
Different people won't have the same goals and desires. Find what works for you. Reading this book is an excellent place to start; it's easy to read and one of the best I've come across.
You can't always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.