Note: Going forward, only one of us will be sharing Random Words each week most Sundays. Jason writes too long, and Jeff is very lazy. You’re welcome.
Jason’s Random Words
It's been said that business leaders are capitalists on the way up, and socialists on the way down. When money is flowing freely and growth is strong, the calls are for a free market, lower taxes, less regulation; as soon as things turn for the worse, no CEO is too proud to tout rescue packages and economic stimulus as being necessary and important for the American consumer. I've seen investors do a similar version of this dance, too, making the shift from growth investor on the way up, to value investor on the way down (or usually close to the bottom).
Honestly, in neither case is it really about politics for those CEOs. It's not even entirely about bias (as Jeff and I discussed on a recent podcast episode) when we investors pivot (or fling ourselves about).
It's even more basic than that. It's about doing what you can to protect what you have.
As investors, when the environment around us changes, it's normal to feel the drive to change how we invest, too. If the bull is running, we want to run along with it; if the bear has slayed the bull, we want to get our cut of the meat before it's all gone.
This is all completely normal. The reason humans have been so successful is because of our ability to react and adapt to changing and different environments and situations. Over hundreds of thousands of years, we have used our big brains to observe the patterns of nature, weather, and animal migration to, at first react, and then to plan. We've used those abilities to observe, extrapolate, and predict to develop the science and engineering knowledge that gave us control over our environments. Our ability to adapt and then alter our surroundings is simply incredible.
Modern investing has become almost frictionless. Trading fees are gone (though there are still costs; we just don't see them anymore). Fractional trading has removed stock price as a barrier. Expanded before- and after-hours trading has made the trading day longer. Apps on mobile devices has put trading anywhere at our fingertips.
As a result, our power to do damage to our wealth has been magnified, even as investing has become far more accessible. This is simply because as much as we are an evolved creature, it’s still fear and greed that get the wheel when things change. To badly paraphrase another great quote, nobody’s investing framework survives the market’s first punch to the face.
The point? We talk about frameworks and building an investing toolbox on the podcast. But generally we are talking about those things as they relate to our goals and investing plan and timelines. I think we can also think about a framework for ourselves, too.
I originally had 400 words on Warren Buffett here as an example of someone who’s evolved as an investor, and realized they were useless. Buffett innately has something most of us have to work at: the right sort of temperament to be a successful investor.
He probably would have been eaten by wolves if he’d been born 3,000 years ago.
What’s the answer? If I had it perfectly, I’d be selling it for $2,500 for a three-day online course. And $25,000 for an in-person seminar in Tahiti with 99 of your best friends. Room, board, and transportation not included, of course.
But I do think part of it is building accountability into your framework. Asking yourself the hard questions, as it were. Better yet, find an investing partner you respect and trust, and be willing to let them push back and ask you hard questions. I got half of those things with Jeff. It’s a start.
A few questions that I think can help you (read: me) be a better investor, observe whether you're evolving and building a plan, or just reacting to fear or greed:
Do I have to make this decision right now?
Why should I make this decision right now versus tomorrow or next week?
Am I just reacting, or am I making a decision grounded in my investing framework and goals?
Prove it.
Does this decision reflect a step towards meeting my goal(s)?
How, exactly, does it?
WWJJD?
That last question may be optional. But I do think, as a loyal reader, asking yourself what would Jason and Jeff do? is at least worth pondering. If certainly not worth acting on. After all, I rarely take my own advice.
No matter what your answer to these questions (and the better ones you come up with) it’s important to own the decisions you make. That’s where the lessons lie, and those lessons are the true path to getting better as an investor, and reaching your financial goals. You can do it. I believe in you.
Jason
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