Time for Reflection
When you enter a new year, it’s always interesting to see how last year played out. As they say, hindsight is 20/20. You can study the specific returns for each month of the year, and even try to remember how you felt during those low or market-agonizing months. It’s worth reflecting on, and it’s what a lot of us at The Bahnsen Group refer to as “game film.”
As investors, we are so anxious about what may happen in the future – the unknown – that sometimes we miss the lessons that history has for us. One of my favorite reports we have for clients is this simple one-page report that records portfolio value, returns, and dividends for each month. This report is simple in look, but rich in memories, as we can recall how we felt during these very months. This report has that same a-picture-is-worth-a-thousand-words feel to it.
Catch of the Day
After studying a handful of these reports with clients this month, I’ve concluded that 2023 reminded me of a lot of fishing. Hence the title of the article.
Have you been fishing before? I have a few experiences, but definitely wouldn’t classify myself as a fisherman. The quirky American filmmaker/comedian Woody Allen once said, “Eighty percent of success is showing up.” I think this has a lot of application to both fishing and investing. You’ve got to be in the boat, in the market, to enjoy the spoils.
Here’s the other thing about fishing. Yes, you show up, then… you wait. The amount of fish you catch and the time between catches is… unknown. Like I said, you’ve got to be in the boat with your line cast in order to catch something.
Investing gets frustrating when you aren’t catching any returns. More so when you get some bites (up ticks in your portfolio value) only to lose the catch (a market pullback). Yet, you’ve got to be in the market to catch those returns. For many clients, all – and I mean nearly 100% of – their returns in 2023 were captured in November and December. Happy Thanksgiving and Merry Christmas.
When the Fish Aren’t Biting
This means investors sat in that proverbial boat with no fish to speak of for 10 months. The type of experience that really tests a fisherman’s (investor’s) patience and endurance. Some packed up for the day, exited the market, and sat shoreside. This proved to be an unfortunate mistake.
I want you to get that image. The image of you being frustrated in your boat with expectations of a big catch with just no activity to speak of. In frustration, you give up; you head in. As your boat hits the shore, you see another fisherman cruise over to where you just were and then shout with glee as they reel in the biggest catch of their life. It’s like that pesky slot machine that took all your money only to pay the jackpot to your successor.
Again, for many investors, 2023 was defined as 2 months. That’s 84% of the time nothing, and 16% of the time everything. This is investing; this is fishing.
Control the Controllables
To me, this is more than a cute analogy. There is a lesson to be learned here. You can’t control the fish, but you can control your process and your emotions. I endow you with the same responsibilities as an investor – focus on your process and your emotions.
Take that energy that is fueling your anxiety, frustration, and disappointment – when markets don’t behave as you wish – towards your financial planning checklist. Financial hygiene is a lifelong endeavor, and there is such power in redirecting those emotions into improving your process. Trust me, there is always a planning item that deserves your time, attention, and emotions.
Control the controllables. Inflation, elections, interest rates, etc., are all outside of your control. They deserve some of your attention for context on the investing landscape, but they don’t deserve to consume all of your attention. Focus on what you can control – the design of your investment portfolio, implementing new tax strategies, the formation and execution of your estate plan, etc.
History is our Best Teacher
So much of investing is just showing up. Having your monies exposed to markets for long time periods is one of the keys to wealth accumulation – this is what I mean by showing up. Let’s not miss the lesson of 2023. It was a year where we spent the first 10 months with no fish to speak of, and by the end of our outing, we had an above-average result. That’s right, in just 2 months, the stock market delivered a return that was above its long-term average. Patience is a virtue, and a profitable one at that.
So, if you’re looking for me, you know where to find me – gone fishing…
Trevor Cummings
PWA Group Director, Partner
tcummings@thebahnsengroup.com
