“You can’t win a marathon without putting a few bandaids on your nipples.”
I read that quote a few days before the New Year. And, with much help from President Trump, Fed Chairman Powell, Apple, and the Chinese, this message seems a very appropriate lead into 2019!
You always hear that investing is a marathon, not a sprint. Pretty much anything good in life is, right? Blood, sweat, and tears. Those are the ingredients for success. Well, from an investment perspective, we’ve been running on a relative flat surface in temperate weather for the past 8+ years, but it might just be time to tape the metaphorical “bandaids on the nipples,” because it seems clear the terrain and the climate are changing.
Blood, sweat, and tears have dominated the past month plus in the major market indexes and – more importantly – in investor psyche. Beginning in October, all major indexes experienced the worst decline from their peak since 2008, the introduction to the so-called “great recession.” Tech and financials lead the way down – which is interesting because Tech shares were sprinting throughout 2018 and Financial stocks were dragging over the past year. Lots of investor blood and tears were shed. (And yes of course, I was sweating. It’s my job to sweat. My mother told me as a kid that I was the “designated worrier” of the family. So I now sweat for everyone.)
But if there is anything that the 700+ point run in the Dow this past Friday reminded us, it’s that winners don’t quit the race – they put bandaids on those nipples and keep running, with full knowledge that additional challenge lies ahead.
And just to keep this metaphor interesting, the finish line for an investor is not an actual line – it’s a series of lines – one personal goal after another over. Unevenly spaced and of different and sometimes unknown magnitude, such as saving for the trip of a lifetime trip with your family to parts unknown, or for your child’s or grandchild’s graduation from college, or the moment you walk away from your W-2 to retire or start a new venture.
Regardless, it is clear that we are still at mile 15 of the marathon, and the terrain is getting tougher. That was a known. But, our response to the challenge has yet to be tested.
So what is the moral of the story? The instruction book for 2019 (and “To Infinity and Beyond,” thank you Buzz Lightyear)? It is to:
- Clearly define the goal posts. Is it retirement income in a steady line? Or is it a few years or college expenses? Or a major purchase (home, vacation, Airstream…?)
- Gut-check your assumptions. If your goals require a 10+% return to become reality, are you comfortable with the risk needed to achieve that aim? Or should you consider other trade-offs that allow you to achieve the same objective with less investment risk? Such as, saving more or moving your time horizon.
- Make or Update your financial PLAN. I capitalize the word “plan” b/c its an imperative and should be viewed that way. Not because a plan is carved in stone, its definitely dynamic, but because a good plan is required to achieve all that you want with YOUR LIFE.
- Keep looking forward. My wise friend Dave says this all the time. Disney likes it too – it’s the main message of “Meet the Robinsons” (which is stellar if you haven’t seen it).
So, keep a healthy supply of bandaids on hand, and Keep Looking Forward!