Commentary: What we can learn from immortal words of Matthew Harrison Brady

By Jonathan Citrin
Citrin Group

Today, political opinions on the economy are heard more frequently than even sports talk or the weather. Hurricane season and Michigan vs. Michigan State now take a back seat to unemployment,

Bernanke, and stimulus. In a time when collectiveness and coalition would provide important momentum, we have never been so partisan. 

For those on the Right, all memories of Bush’s more-than-significant role in our current economic condition have been conveniently erased. For the Left, health care and Supreme Court appointments greatly overshadow the inability of our leader to instill calm and confidence. At this time when we need each other most, we find ourselves amidst a gripping war of words rich only with anger and frustration.

The economy is the big wedge issue for November elections. We are consumed by it. The promise of jobs and the change-bandwagon are more valuable political commodities than even money.

Unfortunately, much like WMD in Iraq, we will eventually discover that what we seek does not actually exist. There is no perfect person that will angelically lift us from economic difficulty, and no one strategy that will magically create eight million jobs. Recovery is a process that will take years, regardless of who holds political office.

Elections and politicians will come and go, with one longstanding truth to remain — if we don’t learn from our mistakes, we are doomed to make them over and over again. It is time we learn our lesson. It is time we realize that the change we so desperately desire cannot be voted for, it must happen on our level. We must stop blaming a decision to go to war or a politician who wasn’t even in office when the recession commenced. To propel ourselves economically, we must fix our own behavior.

Fundamental to successful investing is one key principle that applies to investors at every level of net worth; having absolutely no relationship to a political party or the first Tuesday in November.   And, when it comes to successful investing, setting proper investment objectives is first on the list. All investors must begin not by picking the right time to buy or finding the perfect App to track their portfolio.

Rather, investing commences with taking time to clearly identify objectives for any and every dollar put to work. One wouldn’t build a house without first drawing a blueprint. So, why would that same individual invest even a penny without knowing their objectives?

Setting proper investment objectives includes three components: be specific, be realistic, and be on the record. To that, specificity is essential to laying the foundation toward success. If you plan to invest for a summer home, say so. If you are investing to generate income during retirement, say so. Or, if your goal is simply to outpace inflation, make it known. Being specific is something we all hold within our control. It is a tool that benefits our mentality and our portfolios. This simple element cannot go overlooked. Further, this tool should be applied independent if other assets are for emergencies or a car or a condo, be clear in earmarking. Specifically stating the precise objectives for all invested dollars will make an impact far greater than any election vote cast.

One must also be realistic during this process of setting investment objectives.  An investor who plans to grow their nest egg at 10 percent annually and have low volatility is someone planning to fail.

Someone wanting to be conservative and achieve yields far above today’s low interest rates is completely unrealistic. Gone are the days when we can have our cake and eat it too. Investors are both greedy and loss averse. However, these two faces simply cannot be at the helm of a portfolio that plans to succeed. Risk and return go hand-in-hand. If you desire higher return, it requires higher risk. 

There is no magic stock or bond that is exempt. Nor can we rely on GDP and Washington to resolve the mistake we make far too often — having unrealistic investment objectives, or simply not having any at all. In an environment of unknown global factors and continued market volatility, this could not be more essential. If we harness the energy wasted on political banter and focus it on setting clear, realistic investment objective, it will not matter who is in office or what political party prevails. The fate of our portfolios is in our own hands, not Washington’s.

A final step to success is to go on the record with your hard work. Far too often, investors spend time and energy setting proper investment objective, only to abandon them at the first sight of temptation or causation. If you have done the work to identify your objectives, and done so realistically, it should not matter what happens to interest rates, the Dow, or a candidate. One seeking conservative income during retirement should never worry if the stock markets are bottoming. And, someone investing aggressively with 30 years until retirement need not lose sleep over inflation, interest rates, or near-term volatility. By actually putting our objectives on paper, we formalize our commitment to them and provide ourselves with a written reminder when we are tempted by fear or greed.

We have become immensely disjointed with what is truly needed for our portfolios to succeed.  It does not matter what happens in the White House. What is important, and ironically within our control, is that which happens in our own homes. We must begin this process of correcting our own mistakes and quit blaming our dissatisfaction on an elected official or policy.  It is our own fault for putting all blame and responsibility on others. It is our own fault for buying too many tech stocks in our retirement accounts. It is our fault for buying homes we could not afford.  And, it is our own fault for not having or being unrealistic with our investment objectives. For once, let’s learn our lesson.  Otherwise, we need only look in a mirror to see the guilty party. As stated in a widely published text and made more famous by Matthew Harrison Brady, “He that troubleth his own house shall inherit the wind.”

Founded in 2003, Birmingham-based CitrinGroup specializes in portfolio management and advises clients on investment planning and wealth management.

 

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