THE LONG HAUL

Successful retirement investing is a long-term business. You can’t time the market, so you must spend time in the market to save a sizeable nest egg….

…and finally, 22 years after he first began investing for retirement, he’ll reach his tipping point. That’s the year his investments earn more money than our investor earns for a whole year of work!….

…..That’s the moment you know you’ve done this retirement investing thing right. That you’re going to be able to retire with dignity and even leave a legacy for your family. Dave compares it to that feeling you got as a kid when, on a hot summer day, you rode your bike to the top of a hill, sweating and swerving with every last bit of energy you had. Finally, at the top of the hill, after a moment’s hesitation, your bike rolls forward. You’re speeding downhill with a thrill in your stomach and the wind ruffling your hair. All you have to do is smile and enjoy the ride!

….With the dedication to see your plan through for the long term, it’s possible to achieve the same result (or better) than our example investor. Begin with the end in mind and work with an experienced advisor who will help you choose investments you can keep for decades to come. Plus, your advisor will be able to answer questions you’ll undoubtedly have over 30 years of retirement investing

WISDOM

The breakthrough pop hit is so unpredictable that it’s basically random.

You will always do better with a rational portfolio of second and third place reliable staples than you will in chasing whatever you guess that pop culture will want tomorrow.

A far better question to ask (the student, the athlete, the salesperson, the programmer…) is, “what did you learn?”

Learning compounds. Usually more reliably than winning does.

SUCCESSFUL INVESTING

“How can investors learn to swallow their pride to earn satisfactory, but above average returns while giving up on the chance to earn extraordinary returns?”

…It’s counter-intuitive because an exclusive focus on earning extraordinary returns so often results in below average performance….Trying to knock it out of the park at all times can lead to poor habits in your investment process….What gets people in trouble is that we usually default to poor habits….

…My favorite example in the book tells the tale of former NFL coach Tony Dungy. When he was an assistant coach, Dungy was constantly passed over for head coaching jobs. In part this had to do with his philosophy, which was too simple for many organizations:

Part of the problem was Dungy’s coaching philosophy. In his job interviews, he would patiently explain his belief that the key to winning was changing players’ habits. He wanted to get players to stop making so many decisions during a game, he said. He wanted them to react automatically, habitually. If he could instill the right habits, his team would win. Period.

“Champions don’t do extraordinary things,” Dungy would explain. “They do ordinary things, but they do them without thinking, too fast for the other team to react. They follow the habit they’ve learned.”

There are plenty of financial lessons we can learn from Dungy’s philosophy:

• Investors assume they need to do extraordinary things to succeed, but they do so at the expense of the ordinary things which are so important, yet often over-looked.
• Having a solid process in place that allows you to make the right decisions without thinking about them is such an unbelievably huge advantage when dealing with the inherent uncertainty in the financial markets.
• The inflection points in the markets are where the biggest mistakes are made by investors. Duhigg says in the book that, “willpower becomes habit by choosing a certain behavior ahead of time, and then following that routine when an inflection point arrives.”
• Trying harder doesn’t always lead to better results.
• Making fewer decisions under stressful situations is a net positive.
• You can’t pick and choose when to follow your system. As long as you make good decisions ahead of time you should rarely, if ever, override a good process.
• The learning process never stops. Even the very best athletes in the world can still improve their game.