Bill’s By The Number$

Posted by: Lisa Navarro | Posted on: August 29th, 2022 | 0 Comments

MADE A LOT OF MONEY – Probably my favorite bullet of all-time was the 53/47 split between “up” and “down” trading days in the US stock market over the last 50 years (1972-2021), and the realization that in spite of the near “every-other-day” volatility, the S&P 500 still generated an +11.1% per year return (source: BTN Research).

I’M NOT THAT SMART – Document (in writing) your predictions once a year, e.g., direction of the stock market, interest rates, cryptocurrencies, etc. Then a year later, “score” yourself and evaluate how you did. Repeat every year. It’s a humbling experience but you’ll understand quickly how difficult it is to predict the future. If you don’t write things down and you rely on your memory when “scoring” your predictions, you’re just fooling yourself.

LUCK PLAYS A PART – The bullet that had me shaking my head every year when I updated it compared the fortunes (or misfortunes) of 2 retiring individuals exactly 9 years apart in age. The first person with $1 million invested 100% in the S&P 500 as of 1/01/1973 who was withdrawing an inflation-adjusted $100,000 per year would be out of money in just 9 years, i.e., as of 12/31/1981. The very next day, a 2nd person also with $1 million invested in the S&P 500 as of 1/01/1982 who is withdrawing an inflation-adjusted $100,000 per year would have $7.72 million remaining after 40 years, i.e., as of 12/31/2021 (source: BTN Research).

THINK DIFFERENTLY – Humans are predisposed to “straight-line” their future expectations. g., when the stock market is on a bull run, many investors (and advisors) see their good fortune continuing unabated. Conversely, when the stock market is in a bear market fall, many investors (and advisors) can’t see the rout ever ending. Both assumptions are wrong.

WHICH PERSON WILL BE RIGHT? – Gloom-and-doomers always sound smarter than the prognosticators who are optimistic.

GOOD ADVISOR – If I know 5 things about a person, I can give them advice about investing. Age, time horizon, risk tolerance, tax bracket and (most importantly) objectives. Without those 5, I can’t help you.

WHICH ONE HURTS MORE? – Is now the time to invest? To decide what’s right for you, ask yourself this question: if I go in today and the investment falls 40% in the next 6 months, does that “hurt” more or “hurt” less than if I stay out of the investment today and it goes up by +40% in the next 6 months without me?

KNOW WHEN TO FOLD THEM – Think about “selling early” (whether it’s the stock market, the real estate market, or a business) as analogous to leaving a party early, even though there is a chance that the party may continue for hours. But there is also a chance that the police show up in a few hours to break up the party.

POTUS IS NOT THAT IMPORTANT – Warren Buffett was quoted in 2008 as saying “buy into a business (i.e., stock) that’s doing so well an idiot could run it, because sooner or later, one will.” I’ll tweak the advice to read “buy into a stock that’s poised to do well regardless of the man/woman who is occupying the White House.” Instead, worry about sales/revenue.

COMMUNICATION – To make sure your audience (e.g., your spouse/partner, your kids, your employees) understands the message that you think you just articulated so eloquently, ask them to “say it back” to you.

CURIOUS – Want to learn? Ask open-ended questions, i.e., never ask a question that can be answered with a “yes” or “no” response.

BORING – If you do any public speaking, be wary of “E.G.O.,” i.e., “my eyes glaze over,” in your listening audience. It’s probably not their fault. You probably need to improve your presentation skills.

YOUR REPUTATION IS EVERYTHING – Make it easy for new clients to start doing business with your firm, while at the same time make it easy for existing clients to stop doing business with your firm. Then it’s your job to deliver such a powerful product/service that clients don’t want to leave.

TIME FLIES – For my 4-year old granddaughter, the next year of her life represents an increase of +25% of her time on earth. For my 66-year old body, the next year of my life represents an increase of just +1.5% of my life. No wonder the years are zipping by so quickly for me.

I’M OLD – You are old when your last car purchase exceeds in price your first home purchase.

THIS IS WHAT REALLY MATTERS – Teach your kids self-confidence and how to be happy with themselves. Everything else follows those 2 skills.