Never in my years as an investment professional has a client said to me, “Wes, I can’t wait to retire so I can focus all my time and energy on chasing stocks!” Never.
Still, I meet too many retirees who have taken on second careers managing their portfolios. That’s not a good idea. While it pays to be actively involved in your financial future, there’s a big difference between being active and being immersed. When we become immersed our emotions can take over and we can become reactive, instead of active.
Case in point: Dr. Heart.
Dr. Heart was a client of mine who was a semi-retired cardiologist. Once this client saw the retirement light at the end of the tunnel, he began scaling back his hours at the hospital – going from 80-hour work weeks and 2 a.m. shifts to actually having free time. What did he do with this newfound freedom? He began burning the midnight oil pouring over Barron’s and Bloomberg. He had traded his old job for a new one.
Not only was Dr. Heart not parlaying his time into happiness-driven endeavors, he was swimming in uncharted waters. While Dr. Heart was highly intelligent and highly educated, he was not a financial planner – he was a semiretired doctor. And while I do love Barron’s, it can be a dangerous read for someone without a solid context in planning, for obvious reasons.
Here’s what happened. Dr. Heart busied himself planning and tweaking his financial portfolio. He’d read about a hot stock and question why he wasn’t getting in on the action. Every day, it seemed, he wanted to redo and upgrade a financial plan that had been in place for him for over a year. He had become immersed. And reactionary.
What Dr. Heart didn’t know was that if last week’s “it” investment was commodities, and the week before that it was semiconductors, and the week before that… You get my point.
There is always something better that you missed. There is always something else that you “could have done.” In a perfect world, we’d all time the market perfectly. But we don’t live in a perfect world. Naturally, we all want to buy low and sell high. We don’t have a Stargate in our bedrooms, however, to clue us in on what markets will do next week or next month. It’s simply impossible to know.
This point is not, however, a barrier to participating in the market. We do it anyway. And, over the years, we beat out cash every single time.
I’ve said it before and I’ll say it again here: Investing success is less about perfection and more about participation. Full stop.
Dr. Heart was trying to time the market perfectly. This is an exercise in futility, and it only leads to disappointment, heartburn, and unhappiness. Is that really how he wanted to live his semi-retired life day-to-day? The answer is no. His obsessing over the market wasn’t bringing him any happiness.
Ask the happiest retirees, and they’ll tell you one of their secrets is that they know how to avoid the “shoulda-woulda-coulda” mentality. They’re more “c’est la vie” in their attitude and outlook on life. Some can accomplish this on their own, while others find an advisor or expert they trust to guide them along the way.
We’d be well-served to take a cue from these happy folks. Instead of tuning algorithms, frantically receiving Google alerts about the highest dividend-paying stocks, or making major investment decisions based on an obscure financial journal article, consider working with an advisor. You’ll be taking an easier, softer way. And not only will it maximize your happiness, it may maximize your financial performance too.
Evidence shows that partnering with the right advisor can result in a notable improvement in return. From research on the topic, there is a quantifiable increase in return when an investor works with a financial advisor, called the Advisor’s Alpha. When certain best practices are followed, the result can be an Alpha in the 3% per year range. We’re talking growth and emotional ease. If that’s not a recipe for happiness, I don’t know what is.
So, when your retirement rolls around, or if you’re already reaping the fruits of your labor, take a breath when it comes to your financial future. That doesn’t mean go hands-off, but it does mean inserting some balance into how you manage your portfolio and your emotions.
After all, back to our first point, no one has ever looked forward to a retirement filled with poring over financial journals and reports and striving to predict the market’s future. That’s a losing game where you end up, in essence, chasing your own tail. And unhappy. No one wants that.
Remember that the key is to focus on the things you love doing in retirement, and partner with someone you trust to help you manage the money side of things. Don’t get swept into a role as a novice stock trader. Focus your attention on the endless possibilities of post-career life – like travel, time with friends and family, new hobbies, and you-name-what-else. If you do that, a happy retirement is just waiting for you. Go and get it.