Monday Morning Quarter-Buck 10/08/2018: Chasing Returns vs. Changing Habits, by Matt Fizell

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I’m simply in awe of how quickly this year is passing by.  I remember as a child that my great-grandmother (also an Amy) told me the years go much quicker the older you get.  I now understand what she was talking about!

 In this week's Monday Morning Quarter-Buck, our Financial Planner and Chief Operating Officer Matt Fizell writes about chasing returns versus chasing habits.  His article made me think about a quote that I recently read that said “a good diversified portfolio means you will always have to be apologizing for something.”  That quote is so true, this year US bonds are reacting the way they historically do when interest rates are on the rise (negative performance), when our economy slows, it will be the stocks that react negatively - so we will always be apologizing for something.  However, since we don’t have a crystal ball, diversity is our best defense.


Chasing Returns versus Chasing Habits

By Matt Fizell

“Successful people are simply those with successful habits” –Brian Tracy

As human beings, we are constantly looking for the path of least resistance.  This could not be truer when it comes to saving for retirement, or choosing investment options for our hard earned dollars to work in. Often, we tend to focus on the moving pieces outside of our control and forget to look at the inputs we are making each day, week, month, and year of our lives which contribute to our current financial picture.  When it comes to the investment portion of our financial lives, we commonly get caught up in what our investments have been doing recently, when we should first be asking ourselves “what have I done lately?”.

To best illustrate why we should focus on what we are doing for our finances, rather than what they are doing for us, I have a perfect example of a previous client from early in my career of how “blinded” we sometimes are to our personal impact on our finances. Enjoy!

In 2016, I was fresh out of college and working in my first role as a financial advisor with a client I had inherited from another advisor working at the same firm.  I was fairly confident in my ability to handle this meeting, as it was just a check-up on a couple of retirement accounts held at our firm which I had prepared notes on and we planned to additionally go through his 401(k) statement which he would be bringing in. It would be a quick, and fairly simple meeting… so I thought.

The client had arrived and we began by walking through his 401(k) statement as that was his primary account for saving for retirement which didn’t take very long, and he was quite proud of his investment picks in the account, “everything’s gone up, a lot” he said.  Next we moved on to the accounts held at the firm I was working for, and immediately after looking at the statement he said “we have a problem here… what am I paying you for if my accounts have barely gone up since the last time we met?”. I froze… I had never met this client before, I was not the one who invested his accounts to start, and nothing was too out of line with what was expected within his accounts.. What did we do wrong?  So there I sat with the two statements in front of me, and it was such an obvious answer to his question I felt like a rookie (which I was at the time) for not noticing the answer was right in front of me the whole time… his 401(k)investments didn’t outperform the accounts invested with our firm, but his 401(k) contributions had already been maximized for the year, while the account held at our firm hadn’t been contributed to in over two years! He was focused on the “big number” his statement was showing him, not on the fine details of how the number was being generated, and I am sure he is not alone in doing so. At least we had something to laugh about for the remainder of his meeting.

Moral of the story is, we need to realize what inputs we can control to reach our goals, and make the most of carrying out those actions.  In this case, we celebrated his accomplishment of maxing out his 401(k) and sometimes he can make a bigger impact in a year than the market can on his accounts.  Whether it is saving for retirement, getting in shape, pursuing education… it all starts with focusing on the inputs we can make impact on, and let the rest take care of itself.