My Friend
Growing up, it’s normal to dream about your future. As we grow up, our career aspirations shift, morph, and evolve. Perhaps in 3rd grade, you dreamed of being an astronaut. By 5th grade, you settled on being a pro baseball player, and by college, you find yourself two years into an art history major when your dad nudges you to pivot to something more practical.
In these years of maturation, it is totally normal and probably healthy to leave your options and dreams open. Yet, at some point, setting a direction and sticking to that direction is important.
A good friend of mine was having trouble with this concept. He had tried a number of different career paths and found himself in constant flux. Each path lasted about 18 months, and then he’d shift, restart, and head in a new direction. This can be a tiring endeavor – both for my friend and for his loved ones who were walking alongside him on this journey.
Here was my advice – stick to something, anything. I told him that he wasn’t getting through the learning curve stage of any career, and he wasn’t benefiting from the momentum that one gets when one sticks to something. Time in the chair is meaningful, and you pick up a lot along the way – whether as a plumber or a lawyer – and that tribal knowledge is valuable.
My Brother
If you’ve read my article, A Tale of Two Brothers, you know that my brother has had a tough life. He’s made some bad choices, and the associated consequences have created a bit of a headwind for him. He just never seems to find his footing, and the obstacles he places in front of himself seem to get more challenging over time.
My advice to my brother was similar to that of my friend. I encouraged him to try to make one good decision and then follow that with another good decision. I was – and still am – convinced that if he could connect a handful of good decisions, they’d compound, and he’d experience some meaningful progress. It is such a simple concept, but one that truly has haunted him his whole life. They call it one step forward, two steps backward for a reason.
Me
One day, I decided I wanted to be a financial advisor when I grew up. I was in my 20s when I made that decision, and, at the time, I was definitely still growing up. I found myself in a conundrum – most places would only hire you if you had experience, and in order to get experience, I needed to get hired.
None of the applications I submitted got any traction, so I decided to simply start at the bank. I applied to be a banker, and they said no but offered me a job as a teller – so I snagged the opportunity. I’m going to be candid: I hated retail banking. When I look back at that season of life, it was quite depressing – I do not intend to be dramatic, but it really was.
Yet, my desire to be an advisor outweighed my discontentment with being a teller, so I endured. This was all part of the journey.
The Investor
We have this really fun word in finance, and that word is capitulation.
Here’s the Oxford Dictionary definition:
The action of surrendering or ceasing to resist an opponent or demand.
The definition gives you that white flag / throw-in-the-towel visual. In investing, we use this word to describe when an investor finally gives up on an investment or strategy – they basically abandon ship. It’s when an investor just can’t tolerate it anymore, and they refuse to endure.
A Choice
In each example we discussed – my friend, my brother, and me – there was the opportunity to capitulate or endure. Each of us was on a journey, and at one particular stage of that journey, it got quite foggy. This fog didn’t blur our memory of where we’d been, but it made it hard to see where our path was leading us. Capitulation usually surfaces because there is a lack of clarity about where the path leads. When this happens, our aspirations, dreams, and goals need to be more desirable than the pain or frustration we are experiencing.
To the marathon runner, the pain at mile 20 is overshadowed by the glory of running through the finish line. For a mother, the pain of labor is dwarfed by the joy of holding their newborn. For a college graduate, walking that stage and receiving that diploma outweighs the grind of any all-nighter.
This is hope. A belief, an endurance, that focuses more on the outcome than the current circumstances.
Flipping and Flopping
Ask me this question, “What investor behavior have you seen that causes the most financial harm?”
Great question! I am glad you asked.
The answer is capitulation, or if you want a more technical description, flipping and flopping.
At The Bahnsen Group, our core allocation for clients is a dividend growth strategy. This was the core allocation 20 years ago, it is the core allocation now, and it will be the core allocation 20 years from now. How can I confidently say this? Because this strategy leans on foundational principles about investing that are timeless.
Be sure to hear what I am not saying. I’m not saying that another strategy won’t catch your eye or your attention. I’m not saying you won’t be frustrated with the strategy you resource. I am simply saying that a key to investing success is to endure, and many don’t; many capitulate.
For me, it’s easy to have conviction and faith regarding dividend growth. It’s logical to me that as an owner (stockholder), I should expect to share in the profits (dividends) of the business. It makes a lot of sense that I should be conscious of the price I pay for a company – valuations matter. As a planner, I know the importance of replacing earned income (working years) with investment income (retirement years), which dividend growth investing does beautifully. These three reasons – and others – are what I lean on to endure when my mind or emotions try to knock me off course.
Moral of the Story
The moral of the story? Investing is difficult, and we need to do all we can not to make it more difficult than it already is.
Investing is a journey, and we won’t always have the clarity we desire. Again, we will know where we’ve been, and we will know where we want to be, but we will have to lean on those principles and convictions to fuel us forward. We need to see beyond our current circumstances.
I’ll speak from experience – I hated working in retail banking. Yet, I’m incredibly thankful that it brought me to where I am now. I absolutely love what I do. Those in-the-moment emotions can knock us off of our path, which is where that endurance part becomes so crucial.
So, know the race you are running and the finish line you are seeking, pick a strategy you trust and that is trustworthy, and whatever you do, don’t capitulate.
Trevor Cummings
PWA Group Director, Partner
tcummings@thebahnsengroup.com
