HOW DO YOU MEASURE SUCCESS?
By: Tim Butt
As an investor, how do you measure success when it comes to your investments? Do you have defined criteria and objectives for the short-term and long-term? How do you determine whether the value of your investments or portfolio are earning their fair share and on the right path to achieve your financial goals and retirement needs?
“The beginning of knowledge is the discovery of something we do not understand.”
– Frank Herbert
Before I list a few ideas how we at The Self Empowered Investor measure investing success, I’d like to share how my investment journey began. I think you’ll find it of interest and might even find some similarities with your investment experience.
When I started investing in 1982, I never gave the above questions any thought. I was taught that all I had to do was start young, contribute on a consistent basis, choose ‘solid’ investments and then…the promise land awaited me at retirement. Something changed however along my investment journey that no one had taught me about or how to deal with it. During the ‘90’s,’ there was a fundamental, yet very profound shift that no financial advisor discussed with me. The financial services industry shifted their #1 priority from serving the best interest of their clients…to themselves. The last decade exposed this fact with the huge bonuses paid to those in the industry, the massive fines for misleading investors and fraud, and two painful bubbles. These two bubbles, Dot-Com and Housing, cost investors on average, 50% of the value of their investment portfolios when each bubble burst. I committed to NEVER experience the pain I felt and trust I lost for the financial services industry after the first of these.
That was a defining moment on my investment journey. I was fortunate to have had a longtime friend and mentor, Mike Reichard. Mike had extensively studied, researched and become very knowledgeable about sound, prudent and academic-based investing principles and the short-comings of the financial services industry. He often referred to the industry as totally broken: a truth I totally agree with…just maybe in stronger terms. Mike would provide me books to read from John Bogle, Larry Swedroe, David Swensen, just to name a few. Articles of value were continually emailed to me and he also introduced me to a weekly financial podcast focused on investor education titled Sound Investing.
“The goal of education is the advancement of knowledge and the dissemination of truth.”
– John F. Kennedy
My new found knowledge empowered me to no longer accept what the financial services industry was ‘feeding investors’ but rather challenge it. I discussed with friends how they measured investment success. Most were accepting of what the industry told them and the results of their financial statements…without question. The ‘measuring stick’ was the following; if the value of their portfolio was going up, that was good and their advisor was doing a good job. If it was going down, that was not so good, but it was ok because their advisors assured them it’s just the way markets operate. No one knew why or if the degree to which they were going up or down made any sense. This was the catalyst that inspired me to create The Self Empowered Investor with my son, Steve, which sole purpose is to educate investors and share the simple truths.
“I was bold in the pursuit of knowledge, never fearing to follow truth and reason to whatever results they led.”
– Thomas Jefferson
The Self Empowered Investor believes that through education, knowledge is power. This only works however, when an individual takes action and actually begin implementing this knowledge. We believe measuring investment success cannot be done solely by numbers, but can be achieved through a few simple principles:
- A commitment to enriching your investment knowledge on a continual basis, no matter the pace.
- Keep investments SIMPLE.
- Know who you are investing with and whose interests they must LEGALLY serve, first and foremost.
- You should be in complete control of all your investment strategies, goals, objectives and decisions.
- Invest with a long-term perspective.
- Know and understand your tolerance for risk and loss.
- Control ALL costs to minimize fees and tax consequences and, to maximize investment returns
- Own the world through massive global diversification.
- Leverage the power of compounding.
Below is a table to define the two different investment routes all investors face. The first is what I refer to as ‘Your Game’ being a Self Empowered Investor (investing on your own). The second is where most people invest and I refer to this as ‘Their Game.’ Anyone playing ‘their game’ is completely at the mercy of the industry.
‘YOUR GAME’ ‘THEIR GAME’
Simplicity | Complexity |
Minimize fees, taxes and turnover | Excessively high fees, taxes and turnover |
Eliminate ALL conflicts-of-interest | Continual conflicts-of-interests |
Passively managed long-term strategies | Actively managed short-term strategies |
You’re in complete control | They’re in complete control |
Invest in known products like Stocks, Bonds, REITS and capture what the markets return | Invest in complex, speculative and high risk products chasing past returns |
You’re an informed and empowered investor | Investors are uninformed with little power…and the industry’s preference is to keep them that way |
Your investments are building wealth for YOU! | Investor’s money is building wealth for the industry and all those that work in it |
If you take nothing else from this blog, consider the following regarding the two different ‘games’. First, the two are diametrically opposed and second, in both ‘games’ it is the investor who puts up 100% of the money, assumes 100% of the risk, and has to pay-to-play each game. However, and here’s the important point, those same investment dollars work to benefit two totally different sources: One benefits you while the other benefits the industry.
The choice is simple, you as an investor can continue to play ‘their game’ OR commit a small amount of time to becoming an informed investor and start playing ‘your game’. By becoming a Self Empowered Investor your investment dollars will begin serving YOUR best interest and not that of the industry.
What is your future wealth potential worth? Are you willing to commit to enrich your knowledge, learn the basic investment principles, create sound strategies, and initiate simple actions to have your investment dollars build wealth for YOU? If so, it’s time you become a Self Empowered Investor.
What did you think of this blog? Please share your comments below. If you found this blog of value, we encourage you to share it with your friends and family…they’ll thank you later!