I did something I never thought I would do the other day. I tried on some amazing shoes. I had some birthday money to spend. They fitted perfectly, they looked gorgeous and I could see them with more than one outfit.
I put them back on the shelf.
Thing is – I’ve got shoes – lots of them. Fabulous as they were, they were not what I had come for. My goal was to find a beautiful silver chain for a pearl my girlfriends had given me. Distractions had to be ignored to get what I wanted.
What Are You Really Here For?
Investment performance is not a goal. Whether you pick a share or a fund that does better than your neighbour, will not help send your kids to boarding school, or give you a family holiday in Disney Land or leave something for the kids. Sure returns count but only in the context of delivering your outcomes.
Am I Really?
Be clear about why you are investing – I mean the BIG WHY. What are your family’s most deeply held values and beliefs? Focusing on performance creates all sorts of behavioural mistakes. So when you focus on the next big thing or follow a hot tip you are committing the biggest behavioural mistake of all and that is not being clear about the difference between a personal goal and performance return.
A Good Foundation
So take some time to get clarity around your values and our goals. Start with Why? When your values are clear your decisions are easy. Drill down to get as much detail as you can around your goals. Knowing why you are working towards something will help you manage your behaviour.
Then you have a good foundation to build a plan around.
I’m In Charge
There are a few principals to a solid plan
RISK – how much volatility is in your portfolio
TIME – how long till you reach your goal
SAVINGS- how much can you commit
RETURN-what rate of return will you get
As it happens the first 3 are the ones you can control. As it happens they are also the most important. How much risk you take, how much you save and how long you have are the real kickers here. They determine, more than return, if you reach your goals! Great huh?
So obsessing over stockmarket reports, statements, Finance shows and news columns does nothing as this is the only bit you can’t control and it happens the least important part.
That’s Much More Fun
Now go ahead, write down the things you could do as a family instead of the time you spent slavishly following over markets reports. Focus on the things you can control to get more of what you do want and let go of all the rest!