George D. Marron, BridgeTower Media Newswires
It is pretty easy to get worked up over the 24-hour news cycle and our generally hectic pace. But this year - between the February 2018 market correction, the return of market volatility, tariff talk, Russian meddling and a North Korean Summit - it is fair to say that we have had an early descent into March Madness. March has roared in like a lion.
What's an investor to do? Quite frankly, one of the first things that pops into my mind is the Serenity Prayer "God grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference." Regardless of whether you practice any religion, this is actually fantastic financial advice. It also, requires a full, deep cleansing breath to say it. Sage financial advice and micro-meditation contained all in one sentence. So, let's put it to use.
First, make a list of the things that we cannot change and do not really control. Here's my quick list: daily/monthly/quarterly/ annual stock market returns, the headline writers for CNN and FoxNews, Facebook friends' before-and-after diet pictures, any elected official's behavior, the weather, natural disasters and traffic. We have little to no input on these concerns, yet these are the things that we find most attractive, as well as frustrating and anxiety provoking.
Second, what are the things that we do control: our spending plan, actual spending, risk taking, interpersonal relationships and daily habits. Generally, without being overly obvious, we control our personal behavior. All too often the worries that we cannot control actually change the behaviors that are completely within our control. For example, when the market is running hot and the news is "Let the Good Times Roll," are you falling prey to fear of missing out - maybe you have the desire to over allocate to the hot equities or to time market swings? Have you ever chased performance or chased losses? Did you go to cash with the 2016 election or sell on Feb. 8, 2018? Do you have a financial plan and disciplined investment process? Do you stick to your investment plan or regularly change it with the news cycle?
You control your financial plan, choice of advisor, risk tolerance, asset allocation and spending. You do not control market returns. In fact, your investment advisor does not control market returns either. We control whether we act in your best interests and develop investment plans that seek appropriate risk adjusted returns (Alpha) with less downside risk (Beta) as determined by your risk tolerance. We control whether we use a disciplined investment process. Anyone that promises you a return is selling you something rather than acting in your best interests.
Now, let's combine the lists and hopefully find some wisdom. Even though the items which are beyond our control may be important and of deep concern, they should not be the key drivers in your investment plan. For the most part, when it comes to your investment needs, the items on the serenity list boil down to real and perceived market risk. Courage and Wisdom lay in how you react to these risks.
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Serenity List
Market Risk Real and Noise:
- Geo political issues
- Interest rates
- Inflation
- Jobs reports
- Social unrest
- Volatility
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Courage List
What can I change:
- What is essential spending?
- What is discretionary spending?
- What is my risk management plan?
- Do I need a professional manager or 'let go' of some control in order to achieve my goals?
- How much time do I spend worrying?
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Wisdom List
Implement the Plan:
- Spending plan with cash buffer and withdrawal plan for changing markets
- Investment manager with a disciplined, repeatable process that acts as a fiduciary and filters the important issues on the Serenity List to give you a meaningful opportunity to take action on the Courage List.
- Turn off the noise.
One last thought, after this exercise: If you have your serenity list on a separate piece of paper, go ahead crumple it up and toss it out. Although it may be a symbolic gesture, letting go of those concerns for even a moment may free you to take action where you can.
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George D. Marron, JD, CFP® is vice president for Karpus Investment Management, a local independent, registered investment advisor managing assets for individuals, corporations, non-profits and trustees. Offices are located at 183 Sully's Trail, Pittsford, NY 14534, (585) 586-4680.
Published: Fri, Mar 23, 2018
