KISS — Keep Investing Simple but Smart

Investors young and old often perceive investing to be a complex, intimidating, activity. During the first decade or so of my career, I too thought of investing as an intricate mosaic of math, statistics, and economics. But the more experience I’ve gained, the more I’ve come to realize that investing is a little bit like health and nutrition:  Following a few straightforward, evergreen principles can go a long way to having a successful experience.


Know your “why”

There’s a great quote from the children’s book Alice in Wonderland that I think fits successful investing perfectly:  I’ll paraphrase it as “If you don’t know where you’re going, any road will do”. The single most important driver of a successful investment experience is understanding “why” you’re investing. Having some clarity about what you might want to eventually use the money for, and when that might take place, is a great first step. Even if it’s as simple as deciding whether the money you’re investing is for a new car three years from now or for a “rainy day” 10 years from now is really important. If you think you’ll need the money in three years, and you don’t have other sources of funds to draw from for the car, you’ll likely want to be fairly conservative in how you invest. On the other hand, if you’re investing for an unknown expense 10+ years from now, you might be able to take more (but smart) risks because you have time to recover from any short-term gyrations in the financial markets. In my experience, many people want to start the investment conversation with “what should I buy” when they haven’t answered the question of “what’s it for?”



We’ve all heard the phrase “don’t put all of your eggs in one basket”. I think it’s an incredibly wise and important piece of wisdom in investing. Many investors want to believe that they, or the investment managers they hire, can foretell the future. But whether we are talking about the short-term direction of the stock market or the performance of an individual company, we should all acknowledge that the future is unknowable to everyone. That’s why I believe diversification is so important. If you own hundreds or thousands of companies from around the world, you get two important benefits:  First you won’t be risking your future lifestyle on the performance of just a small set of stocks, when we know from history that sometimes the most glamourous stocks at a given point in time turn out to be losers in the future. Second, the more different stocks you own, the higher the likelihood that you’ll have some of your money invested in the “big winners” of the next decade, even though today none of us know who the “next Amazon” is going to be.


Keep costs low

One of the most unfortunate facts about the investment process is how difficult it can be for everyday investors to find accurate information about the costs of investing. For decades, the financial services industry has often opaquely embedded important information about costs in 100+-page documents, hoping that investors won’t have the patience to look for it. Yet, costs are incredibly important to a successful investment program. Every dollar we as investors pay in fees to investment managers or mutual funds is one less dollar we have working for us in the financial markets. While a few tenths of one percent might not seem like much, when you take the dollars you’re investing and compound that annual percentage over the years or decades you plan to hold the investment, you can end up losing a material amount of wealth in fees. To make matters worse, the phrase “you get what you pay for” does not apply to the world of investing. There is no evidence that mutual funds or investment managers with high fees earn higher returns for their clients. In fact, the reverse is true. Always make a point to understand the fees of any investment you are making and try to determine if lower cost options are available.



Earlier in my career investing seemed to be all about cold-hard numbers and data, but I’ve since learned that, like most things in life, emotions play a huge role. The investment journeys we take during our lifetimes will be filled with alternating periods of fear and greed, and the best investment plan in the world won’t help us as investors if we can’t stick with it. We are human; no one enjoys seeing the value of their wealth decline and not knowing when it might recover. Similarly, it’s natural to feel some degree of FOMO and want more when we hear stories of those around us (physically, or digitally) doing well. But letting those emotions drive our actions can easily lead us to poor investment decisions. When markets decline, we will feel like selling to “stop the bleeding” and when markets have done well for a period of years, we will be tempted to take big risks. Far too many investors don’t think about these dangerous realities in advance and develop plans to manage them. A few simple techniques, such as looking at your account values less frequently, making a pact with yourself to always allow a five-day “cooling off” window before making any investment decisions and talking with a trusted advisor (professional or not) who knows your specific goals and circumstances can go a long way to making investing a less emotional, and hopefully more successful, activity.

While investing can be an incredibly deep and complex process, I think 90% of a successful investment experience can be found in the combination of knowing your purpose, acknowledging that the future is unknown, paying attention to costs, and not being taken “off course” by what’s going on around you. That being said, just because those things seem simple doesn’t make them easy. World-class athletes and musicians who have practiced for decades still have coaches to help them stay focused on what’s important and having a financial coach can serve the same purpose.


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