October 2018 Monthly Insight: Becoming a Lifelong Student of Investing

Posted By T. Lee Sherbakoff, CPA/PFS, CFP® on Oct 3, 2018


“Tell me and I forget. Teach me and I remember. Involve me and I learn.”
—Benjamin Franklin

Have you ever embarked on a home improvement project? You are confident you can complete the task, but you are unfamiliar with the details. You need guidance from an expert. That is where your local home improvement store comes into play. The employees not only know their craft exceedingly well but are excited to share their ideas. You can see it in their body language and the sparkle in their eyes when they explain the nuances of a project. Plus, they are happy to share any problems you might encounter and how to sidestep pitfalls. They are, in one word, educators.

When we ponder the fact that you have entrusted us with your finances, your financial goals, and your dreams, it is truly humbling. Of course, we understand there are differences between a financial plan and a home improvement project. But we draw the analogy because they have one commonality—they are linked by the educational component.

This month, our goal is to share with you some of the basic building blocks that will put you on the path to becoming a lifelong student of investing. Even the best of the best never stop learning.  In fact, being a lifelong learner might just be the first principle of becoming a great investor.

  1. Create a long-term plan and follow that plan

We have assisted many of you in developing a long-term financial plan that’s designed with your financial goals in mind. Great investors have a financial plan that informs their portfolio allocation. The plan becomes your guide. It is a financial roadmap that is unique to you and puts you on the best path for your financial journey. That’s why true investing starts with a plan. The financial plan is the bridge to your dreams.

  1. Learn to control your emotions

Successful investors know how to control their emotions. The best way to do that is to have a well-thought-out financial plan. The plan is grounded in empirical research. It provides us with boundaries. It keeps us on track when storm clouds gather. We recognize the plans we recommend are not bulletproof, but we are confident they put our clients on the best long-term path to reach their goals. We also know that when volatility strikes, some folks take it in stride while others want to take a detour from the plan. They are tempted to react emotionally. Remember, longer term, markets rise in most years and sticking with the plan helps to avoid mistakes that can be costly in the long run.

  1. Become disciplined and be patient

Along with emotional control, a financial plan helps to reinforce discipline. By design, the plan encourages patience and puts you on a gradual path to wealth accumulation through the power of exponential growth. There are no shortcuts. We are open to innovation and empirically verified research, but wewould caution you to be very careful about what we call the “flavor of the month.”     The legendary investor Warren Buffett sticks to what he knows best and invests over a very long-time horizon. His disciplined approach and his patience have brought him rich rewards.

  1. Know the value of diversification

Here’s a principle welive by: a one-investment portfolio is too risky. Diversifying among stocks, bonds, cash, and real estate doesn’t guarantee there won’t be short-term losses, but it greatly reduces risks and allows you to participate in investments that are rooted across the U.S. and global economy.

  1. Maintain a healthy level of skepticism and be a lifelong learner

A good investor asks questions. Be wary of investments that promise riches or offer returns that are too good to be true. If you come across such a tempting scheme, please ask us to review it. We promise to offer you an objective analysis. We’ll point out both advantages and disadvantages. More importantly, we’ll counsel you on the questions you need to pose to those who are asking for your trust. We can’t begin to tell you how much it pains us when we see someone get scammed.

Let’s sum this up by getting back to what is the foundation, or the cornerstone, of becoming a skilled investor. We mentioned it just as we began: become a lifelong student. Never stop learning and immerse yourself in the principles we have shared.

We hope you’ve found this review to be educational and helpful. If you have any questions or concerns about your financial plan, goals, and objectives or your portfolio allocation to support those goals and objectives, let’s talk. That’s what we’re here for.

As always, we are honored and humbled you have given us the opportunity to serve as your financial advisor.