Investment Lessons from “The Tortoise and the Hare”

Investment Lessons from “The Tortoise and the Hare”

“A Hare was making fun of the Tortoise one day for being slow.

‘Do you ever get anywhere?’ he asked with a mocking laugh.

‘Yes,’ replied the Tortoise, ‘and I get there sooner than you think. I’ll run you a race and prove it.’”

So the story of “The Hare and the Tortoise” begins…

We’ve all heard it. We’ve all read it (hopefully). What the heck does it have to do with investing? Well, quite a lot, I’d argue.

How did you feel during the time period of October through December last year (2018) as it relates to your investments? Confident? Opportunistic? Concerned? Scared? Fearful?

I would say for most of you, particularly those in or close to the retirement years, that the last three words better describe how you felt. And if so, I don’t blame you. When media networks exclaim that “the sky is falling” and “to take cover,” it’s hard to ignore these statements. We’re human. Our left-side logic part of the brain doesn’t usually rule in these scenarios. The right-side emotional part of the brain often rules; and if acted upon, the effects can be devastating.

If you decided to cash-in at the end of 2018, you would have most likely locked-in investment losses for the year depending on your investment allocations. The Hare certainly would have advised that you cash-in.

Fast forward to February 22, 2019. Below are year-to-date investment returns for a several indices:

S&P 500: +11.3%

Dow Jones Industrial: +11.6%

MSCI ACWI: +10.1%

MSCI EAFE: +8.6%

Not too bad of returns for just 1 ½ months of the year. Of course, we may not finish the year within these return ranges, but the point is made: Had you let fear reign in October through December of last year, you would have missed the upside we’ve received so far this year.

The Tortoise would have capitalized on these investment returns, because “slow and steady wins the race.” The Hare? Perhaps he cashed-in last December, took a nap, and is still waiting for the “right time” to invest again (i.e. buy-in when the price is much higher).

We often say to clients in our office that we sure wish investment returns were these pretty little stairsteps that only went up and never down. Unfortunately, that’s not how long-term investing works. You have to take the good years, and the not so good years. Research continually shows this type of investing to give you the highest probability of achieving your investment goals.

We are sympathetic to our clients when the market volatility occurs. We won’t shame you for feeling the way you do. We will listen. And we will revisit your financial plan that we prepared together and see where we are. This strategy brings us back to the long view. This strategy has proven to be helpful.

The story ends here: “The Tortoise meanwhile kept going slowly but steadily, and, after a time, passed the place where the Hare was sleeping. But the Hare slept on very peacefully; and when at last he did wake up, the Tortoise was near the goal. The Hare now ran his swiftest, but he could not overtake the Tortoise in time.”

As shared by a billionaire investor to my old boss Dave Ramsey: “Every time I read this story to my grandkids, the Tortoise wins the race.”

We are here to run (or walk) the race alongside you.

For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

Diets and Money – Quite the Pair

Diets and Money – Quite the Pair

You may have noticed (or not) that we took a two-month sabbatical from the Rivertree blog. We take advantage of the holiday season to plan, regroup and recharge for the new year. We are excited about 2019 and hope you are as well.

On a personal note, I am doing something I have never done before – a restricted diet. What exactly is a “restricted” diet? Well, prior to January 1st of this year I couldn’t have told you. But as of this writing, I’m now on day 29 of 30 and have learned quite a few things about food I never knew.

In the simplest terms, a restrictive diet is saying “no” to food groups that could potentially be harmful to your body. After the 30 days, you slowly re-introduce excluded food groups and see how it makes you feel. Sound like the Whole30 elimination diet? Well, it is.

My motivation for this diet was not to lose weight but to see how food was impacting my overall health. To say this diet has been enlightening would be an understatement. All my aches and ailments haven’t been cured, but I have certainly seen the benefits in eating healthier, wholesome foods.

So, what does dieting have to do with money? Well, quite a bit, I’d argue.

When I ran into Books-a-Million on January 1st, guess which books greeted me immediately at the door? You got it – money and dieting. Dave Ramsey, Suze Orman, Tony Robbins, Keto, Paleo, Plant Paradox, and Whole30 all shared a nice, wooden table that you couldn’t miss upon entry. I had settled on Whole30 prior to arriving, but I couldn’t help but thumb through each book on the table.

Then it hit me: What do we often say to our clients and seminar attendees as we discuss budgeting/cash flow planning? Give the system we teach a try. If it doesn’t work, you can always go back to your old system!

I was dreading saying “no” for the first time to many foods I love. But knowing that I could go back to my “old system” in just 30 days gave me what I needed, expecting that I wouldn’t want to go back completely.

Consider this quote about change:

““We change our behavior when the pain of staying the same becomes greater than the pain of changing. Consequences give us the pain that motivates us to change.

― Dr. Henry Cloud & Dr. John Townsend

Does this quote resonate with you? What are consequences of poor money habits or diets that might motivate you to change? Often, it’s a serious health diagnosis, high-balance credit card statement, overspending in retirement, or even bankruptcy.

Don’t let it come to these consequences. Start the process of change now. Dr. Cloud also says that change comes this way: Grace + Truth + Time = Change.

We hope 2019 is a great year of healthy change for you. If you need help or counsel to begin this journey, please don’t hesitate to contact us. We’d love to help.

 

For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

Balancing Contentment, Gratitude and Responsibility

Balancing Contentment, Gratitude and Responsibility

I’m doubting the title of this blog already. Is it correct to even say, “Balancing contentment, gratitude and responsibility”? I honestly don’t know, but hopefully by the end you’ll get what I’m saying.

There’s a story about one of the richest men to ever live. He was asked, “How much is enough?” He replied, “Just a little bit more.” Isn’t it true for many of us? Just a little bit more…more time, more house, more car, more money, just more (fill in the blank).

Contentment

From the earliest of years, we’ve strived to “get ours.” Let’s call it self-protection. We are wired to feel safe and secure. Is striving for these things inherently bad? Well, no, unless we are looking for safety and security in the wrong places.

Perhaps the Apostle Paul was closest to mastering the idea of contentment:

I rejoiced in the Lord greatly that now at length you have revived your concern for me. You were indeed concerned for me, but you had no opportunity. Not that I am speaking of being in need, for I have learned in whatever situation I am to be content. I know how to be brought low, and I know how to abound. In any and every circumstance, I have learned the secret of facing plenty and hunger, abundance and need. I can do all things through him who strengthens me.” -Philippians 4:10-13

Wow. These words are coming from an imprisoned man! How can that be? Answer: His Source of contentment. The last verse in the passage tells us “the secret” to his contentment – Christ strengthens him.

Responsibility

We do have responsibility in the midst of knowing we are not fully in control. What is that responsibility? To steward our bodies, our minds and our talents. We are called to run the race while at the same time resting in the fact that we aren’t fully in control. We can do all the right things, yet suffer an injury or a loss, whether that’s physical, emotional or financial.

A saying I heard years ago and quote often is this: “Paddle the boat and pray for wind.” Paddling the boat is referencing human responsibility. And the wind? Our great Creator. We can have the best paddles, boat and crew. Yet, they have little power over massive waves. In the end, the waves win…God wins. He is all-powerful.

Think of the apostle Paul. Once imprisoned, I’d be tempted to give up. “Well, there goes the work.” However, Paul was inspired by God to write the most powerful words ever written! He did not give up. He kept paddling.

Regardless of our circumstances, we are called to keep paddling; keep moving; keep showing up. It’s certainly not easy. But thankfully, we were never asked to paddle alone. Maybe that’s what you have been missing – paddle mates. If this is you, I encourage you to courageously seek out some teammates.

Gratitude

So, this last one could be the hardest. As I’ve aged, I’ve become more aware of the brokenness in this world. I can quickly become discouraged in the midst of political wars and injustices. If I’m not careful, I can live as though God is not working in the midst of this turmoil.

However, I’m then reminded that we’ve been at war with one another since the beginning of time. A basic history book will prove this point. So how are we to respond? Start with reflection. Here’s the Apostle Paul in the opening chapter of Philippians:

I thank my God in all my remembrance of you, always in every prayer of mine for you all making my prayer with joy, because of your partnership in the gospel from the first day until now. And I am sure of this, that he who began a good work in you will bring it to completion at the day of Jesus Christ.” -Philippians 1:3-6

Listen to Paul’s confidence in God’s completion of a good work that He began. The Lord hasn’t forgotten. We can rest in this promise and be grateful.

Gratitude must be practiced. It’s like a muscle that must be exercised. Left to itself, it’s going to eventually get flabby and weak.

Conclusion

I personally do not believe contentment, responsibility and gratitude can be mastered. By mastered, I mean that you don’t have to regularly practice it. We may hear that someone has mastered an art or a sport. But don’t they still practice or else become weak? I’d say so.

This Thanksgiving, I hope and pray we can appropriately evaluate where we are in regards to each of these areas and start paddling where needed. The results will be worth it.

The Gap in Financial Planning

The Gap in Financial Planning

Have you ever assembled a piece of equipment, or perhaps a toy for a child, stepped back and admired your great handiwork, only to find a part (or two) leftover which should have been used? On the outside, your masterpiece looks flawless. On the inside, however, you’re wondering just how important those pieces are. That “gap” could be the most important pieces.

When it comes to financial planning, there is an area we most often see as the “gap” after 35+ years of us working with clients.

The “gap” is this: What happens to you and your family in the event of an unexpected death or disability? We can plan for your investments, savings, insurances, budget and retirement. And all of that is good. But what happens to your minor children in the event you pass away prematurely? I know…not a fun read for today. But, it happens, and we all need to have a plan in place for what we desire to occur when, not if, we pass away. What I am talking about here is an estate plan.

Let me address a few myths when it comes to estate planning:

1) Estate plans are only for rich people. False. Estate plans are for ALL people. We ALL have an estate (https://www.estateplanning.com/What-is-Estate-Planning/)

2) My family will just cordially work out who cares for our minor children. False. More often than not, a judge listening to both sides of the family makes the best decision that he or she can. Whew! How much easier this would have been with simple wills declaring his or her wishes for who should care for the children.

3) The courts will just work out what is fair for everyone involved. False. What is considered “fair” is relative to those involved. Did you know that in many states, Mississippi being one, a spouse receives the same percentage share of an asset as a child would should the deceased die without a will and the asset had no named beneficiary?

These are just a few myths that come to mind. Over the years, we have seen the heartache involved when a person’s estate is not planned well, or at all. They may have sufficient assets to care for loved ones. However, without a properly designed estate plan, disaster can occur, causing stress for loved ones.

We often get asked: “Should I pay an attorney to help, or could I write my own will?” Well, “yes and yes.” You should pay an attorney, and you can write your own will. However, we believe it is much wiser to get professional help, especially should a problem arise down the road. You can attempt to diagnose that continual headache, rash or stomach pain all day long using webmd.com. Or, you can pay a doctor who does this type of work on a daily basis.

So, what are essential parts of an estate plan? Our industry has called it the “Three-legged stool”:

1) Last Will and Testament
2) Durable Power of Attorney for Finances
3) Advanced Healthcare Directive

That stool could have a fourth leg for situations needing a Revocable Living Trust. We won’t go into detail on any of these today, but it’s worth bringing up each of these items to the attorney you choose.

I have observed that the hardest step is the first step – not just in estate planning, but in many important areas of life: Making that first phone call and asking for help.

I am a big believer in professional help. That includes the work we do as financial planners. All your ducks may be in a row, but it’s worthwhile to have a second set of eyes to make sure. We think you’ll be glad you did.

A Wake-Up Call

A Wake-Up Call

It’s that time of year for many of us – kids back to school, a new routine established, and a list of to-do’s. I’m a big fan of the change of seasons (but a change in plans, now that’s another story!)

I love that there are biblical writings about different seasons of life, none better than Ecclesiastes 3. Listen to what Solomon wrote:

 For everything there is a season, and a time for every matter under heaven:

a time to be born, and a time to die;
a time to plant, and a time to pluck up what is planted;
a time to kill, and a time to heal;

a time to break down, and a time to build up;
a time to weep, and a time to laugh;
a time to mourn, and a time to dance;
a time to cast away stones, and a time to gather stones together;
a time to embrace, and a time to refrain from embracing;
a time to seek, and a time to lose;
a time to keep, and a time to cast away;
a time to tear, and a time to sew;
a time to keep silence, and a time to speak;
a time to love, and a time to hate;
a time for war, and a time for peace.

(Now some of you may have thought the Byrds would be credited for the above with their hit song, “Turn! Turn! Turn!”, but that’s certainly not the case.)

Some view the book of Ecclesiastes as a depressing read. I get that. But I’ve always read this book as a wake-up call. The writer is one of the wisest men to ever live, and he’s reflecting on life at the end of his own. What a gift for us!

“For everything there is a season, and a time for every matter under heaven.” That’s how this chapter begins – to let us know to expect different seasons of life. There will be seasons to rejoice, and seasons to mourn.

I’ve written in a previous newsletter about learning to live in the good and bad of life. This journey continues. I’ve not yet arrived…nor will I. But it’s worth honestly engaging in the journey rather than ignoring its existence.

What season of life are you in? Mixed emotions of kids going back to school? Rejoicing in an unexpected blessing? Mourning the loss of a loved one? Feeling ashamed for procrastinating in an important area of life, including money?

Know this – you are not alone. My encouragement to you is to bring others into whichever season you are in. We are not wired to go it alone. Connect with others, share with others, mourn with others, and rejoice with others. Our circumstances may not change, but, as we take these steps, our ability to cope does.

Know this also: There is a Savior who walked this earth and experienced different seasons of life: rejoicing at a wedding, mourning at a death, trusting while suffering. Be comforted in this truth.

Giving Freely vs. Suffering Want

Giving Freely vs. Suffering Want

There’s a story about a rich man whose land produced an abundant harvest. He was posed with a dilemma as he already had more than enough, but he didn’t have a place to store these additional crops. His solution was to tear down his existing barns and build bigger ones. He even imagined what he’d say to himself once done with this work: “Self, you’ve done well! You’ve got it made and can now retire. Take it easy and have the time of your life!”

So how do think this story ends?

“God showed up and said, ‘Fool! Tonight you die. And your barnful of goods – who gets it?’ That’s what happens when you fill your barn with Self and not with God.”

If you’re a Christian, this story may be familiar as it’s found in Jesus’ parable in Luke 12:16-21. If not a Christian, you may wonder what does this story have to do with you? A lot, I’d say.

We’re often asked at Rivertree, “What do y’all (or “you all” for my northerners) actually help people do?” We may answer that we help plan for their retirement. Isn’t that contradictory to the story above? It could be if we left out some essential pieces of the full process.

One of these “essential pieces” is us asking, “When you retire, what are you planning to do with your time?” A myth is the joy of the “couch potato retirement.” Now there’s nothing wrong with relaxing more and catching up on some shows. But is that your full-time plan?

I’ve read a book about those who bought into this plan. Their main purpose became themselves. Sound familiar? (Reference paragraph 1). What does the book say happens to these folks? They die sooner than statistically expected. Why is that? They lost purpose. Is there a better way to “retire,” you might ask? We’d say so. Insert “generous living.”

“One gives freely, yet grows all the richer; another withholds what he should give, and only suffers want.”  (Proverbs 11:24)

Listen to Tim Keller’s reflection on this verse:

“The more you scatter your wealth, the more you gather it, and the more you try to keep it for yourself, the more it dissipates. How could that be? Think of farmers. The more they scatter seed, the more they will reap. And keep in mind that the seed comes back in better form, as harvest you can eat and sell. In the same way, spiritually wise people realize their money is seed, and the only way for them to turn it into real riches is by giving it away in remarkable proportions (cf. 2 Corinthians 9:6).

This is not a promise that the more you give away, the more money you will make. Rather the more you give away wisely to ministries and programs that help people spiritually and physically, the more your money becomes the real wealth of changed lives in others and of spiritual health in yourself. And you will be walking in footsteps of the one who was literally broken and scattered so he could gather us to himself.”

See the difference in self-living vs. generous living? It’s suffering want vs. gaining more. That “more” isn’t money. It’s joy.

There’s a quote from Randy Alcorn that has stuck with me: “The only antidote to greed is giving.” When we are tempted to clinch our fists around money (or build bigger barns), give it away. This breaks greed’s power, whether you’re a Christian or non-Christian.