At my local farmer’s market a few Sundays ago, I was surprised to find that every vendor was out of celery. I remarked on this and was told that celery sells out quickly now due to a recent diet/health craze – drinking celery juice. It got me thinking about the parallels between good nutrition and good investing habits. While both are relatively simple and straightforward, it’s often difficult to stick to the basics. It is easy to get distracted by the latest diet trend (drinking bone-broth, the Atkins diet, etc) or latest investing trend (bitcoin, gold, cannabis stocks) instead of staying steady with your long-term plan.
“Eat your vegetables!” we were told as children. Or as Michael Pollan says: Eat food. Not too much. Mostly plants.
They’re both good reminders to stick to the basics when it comes to your health.
- A good advisor doesn’t follow the latest hot trend
- A good advisor will not to be able to pick the next Amazon, unless he or she is really lucky
- A good advisor isn’t going to try to outwit thousands of Wall Street professionals
Instead, your financial advisor should help you “eat your vegetables and exercise.” In other words;
- Spend less than you earn
- Invest that amount regularly in a low-cost diversified portfolio
- Make sure your asset allocation is appropriate for your age, risk tolerance, and goals
- Re-balance when necessary
Of course, holistic financial planning can be much more complicated, taking into account your insurance needs, estate planning, taxes, budgeting and long list of other details. The basics of investing and saving, however, remain the same.
There’s a story about well-known investor, Warren Buffett and his business partner, Charlie Munger. They were asked why others aren’t able to replicate their strategy. Their reply was that their strategy is too simple and most people can’t stick with simple – they get distracted trying to get an edge or outsmart the market.
My job as an advisor isn’t to outsmart every other investor. My job is help my clients avoid big mistakes and stick to their plans. It may sound a little boring, but often the best approach is the simple one.