By Dale S. Lam, CPA / PFS, CFP®
October, 2016, Excerpt from Quarterly Client Commentary
Fall is in the air as the leaves are starting to change color and the hot summer nights turn into crisp fall mornings. Another unmistakable sign of fall, like it or not, is the onslaught of football season. From high school, through college and onto the pros, there is no lack of football entertainment for those who enjoy the sport.
While football has little to do with investing, I read an interesting quote recently from legendary college football coach Lou Holtz that also has investment implications. Holtz, currently a sports announcer, is the ex-coach of several major programs, most notably Notre Dame. In giving insight into winning, Holtz commented: “You don’t need the big plays to win; you just have to eliminate the dumb ones.”
The same goes for investing – eliminating the dumb moves greatly increases the likelihood of success. Unfortunately, that’s easier said than done. Our emotions often get in the way and wreak havoc on our investing discipline. Today’s digitally connected world makes the taming of our emotions even more difficult. When many of us were young, we would catch up on the news about every 24 hours via the nightly news or the morning newspaper. Contrast that with today’s world where we can be updated within minutes, or even seconds, with information sent directly to our cell phones.
All of the constant news and information can be quite distracting to our long-term investment objectives. That’s why we go to great lengths to understand your unique situation and long-term goals. By doing so, we can develop a strategy for the long term which allows us to navigate through the many bumps in the road that will arise along the way.
A quote similar to Lou Holtz’s from someone other than a football coach might be in order (and lend a little more credibility to this commentary)! I often quote Warren Buffett, the famed CEO of Omaha, Nebraska based Berkshire Hathaway (often called the Oracle of Omaha). Buffett is a disciplined long-term value investor who has amassed a personal fortune that generally puts him in the top two or three wealthiest individuals in the United States.
While most of us have heard of Buffett, the name Benjamin Graham is probably far more obscure. Benjamin Graham was Buffett’s teacher at Columbia Business School, and Buffett credits him with being the second most influential person in his life, with his father checking in at number one.
Graham passed in 1976, but prior to his death he stated that “The investor’s chief problem – and even his worst enemy – is likely to be himself.”
Graham, with his strong economic background and consistent focus on business cash flow and valuation, realized that doing “the numbers” was the easy part of successful investing. The hard part was remaining true to our long-term focus and taming those difficult emotions of fear and greed that can so often get in the way.
Past performance is not a guarantee of future results. Any indices referenced are unmanaged and cannot be invested in directly. See Disclosures.