Author: Jay Mooreland

Make this a Great Summer by Practicing Strategic Omission

As summer comes upon us, many people take time off work, travel, and spend time with family and loved ones. The summer provides many opportunities for us to make memories – memories that can last a lifetime and provide years of joy.

But life is complex. We often need to juggle multiple priorities, many of which are good. Yet we have limited time. We choose to focus and spend time on some things at the expense of others…all of which may be good. There are things that are good, things that are better, and things that are best. To make this a great summer, we should identify and choose those things that are best, strategically omitting other things that may be good.

Strategic Omission

We often think achieving greater results such greater happiness, greater meaning, and greater connections requires that we do more of something. But the opposite is actually true. We can enhance our lives and experiences by omitting things that may distract us or “crowd out” things that are better or best.

This can be a difficult endeavor because much of what we do on a daily basis is habitual. We may want to remove an activity from our life but have a hard time because we do it automatically. This is where creating a “Don’t Do List” (instead of a To-Do List) could be helpful. Identify what you will stop doing, write it down, and follow it daily just like you would a to-do list.

What Should I Omit?

As you consider what may be best to omit from your life this summer, the first place to start is on your personal values. Which activities best support your values and the legacy you want to leave?  Which activities do you want to engage in that do not necessarily support your values? And which are negative activities? Make a list and prioritize. Then choose to omit at least one of them from your life this summer – making time for things that are better and best. 

Too many people live with regret – things they wish they would have done differently but cannot go back and change. The summer of 2024 will only happen one time. I encourage you to consider what activities you can stop doing so you can have the best summer possible.

– Scott

©2024 The Behavioral Finance Network. Used with permission.

Uncertainty, Outcomes & Our Decisions

The brain has a lot of gray matter but hates gray areas. As a planning machine, the brain needs information that is certain so it can figure out the best course of action. And when we don’t get certain information, we get agitated. Perhaps you have said, “I don’t care if the news is good or bad, just tell me what it is. Not knowing is the worst.”

Probability Problem

Whenever there is uncertainty (almost always) we must rely on probabilities to help us make the best decision. But considering probabilities requires a lot of thought and analysis. It means we have to think statistically, which most of us prefer not to do. Instead, we simplify probabilities whenever possible.

We all want to know what is going to happen in the markets. In the face of uncertainty, we seek out some degree of certainty – even an illusion of certainty. We are attracted to forecasters and market experts who will tell us what is going to happen. And we confuse their popularity and confidence with their ability to predict the future.

Investing Takeaway

The truth is we can think of a lot of things that have occurred that cause investors and “experts” alike to scratch our heads. Surprises and uncertainty are just about the only certainty in the financial markets.

We can’t control the markets or the economy. We can’t rely on expert forecasts, no matter how confident they sound. Even those forecasts with low or high probabilities aren’t sure things – sometimes the unexpected happens.

But we can control how we respond…the choices we make. A Financial Plan provides guidance and structure. It needs to be coupled with a Response Plan – how we will respond to the uncertainties and surprises. That’s what I am here for. Let’s focus our time and energy on those things we can control – our personal financial and response plan.

– Scott

©2024 The Behavioral Finance Network. Used with permission.

What Investors Can Learn from Athletes

Nick Saban, recently retired football coach of the Alabama Crimson Tide said, “If you want to be good you don’t really have a lot of choices.” He was referring to the choice to either be disciplined (or not) to a specific process that would lead to success.

No one is born an athlete. We are all human with similar preferences: sleep/rest over working out, eating the donut rather than broccoli, and having fun instead of working.

Athletes are created through dedication to a routine or process that will help them become an athlete. They show up at the gym, they follow a nutrition plan, and they endure in their routines even when they don’t feel like it or want to. Persistent discipline to that routine is what makes them an athlete.

A Solid Investment Process

The “secret” to becoming a great investor is no different. It requires discipline to a process or routine. Not just any routine, but the right one. Watching the stock market is a routine, but it doesn’t develop a successful investor. So, what routines or process can investors take that will help them become great?

  1. Ignore Economic and Market Predictions. Our desire for future certainty puts us at risk to fall for the illusion of certainty – which is the only certainty the experts offer.
  2. Focus on Fundamentals, not Price Movement. Daily stock price movements seldom represent the true value of the company at any given time. Earnings and cash flow deserve your attention, not the price movement of the stock.
  3. Have a Reaction Plan. A reaction plan is a process itself of what you will do when the inevitable surprising events occur. Will you respond immediately? Will you take your cues from the media? Will you talk it over with me? I suggest the latter.

The Process and You

Defining your investment process is important and practiced by many investors. But the maintaining discipline to that process is what separates the average investor from the most successful investors. Discipline is what makes athletes, athletes. And it is what can help you achieve your financial goals. I am here to help you along the way.

– Scott

 

©2024 The Behavioral Finance Network. Used with permission.

Succeeding at Self-Control

Self-control is an important characteristic to develop that can help us in all aspects of our lives from biting our tongue, to passing on the sweet treat, to accomplishing our New Year’s resolutions. But it isn’t easy! In fact, it can be downright painful, especially when trying to control some urge.

It’s Not About Willpower

Many people say what they need is more willpower and discipline, but that isn’t it. And thank goodness because we have a limited amount willpower that depletes quickly.

James Clear, author of Atomic Habits, said, “The people with the best self-control are typically the ones who need to use it the least…the way to improve these qualities is not by wishing you were a more disciplined person, but by creating a more disciplined environment.”1 (emphasis mine)

It’s About the Environment

When we engage in an activity that requires self-control, we should seek to create an environment that will lessen the need to use self-control. If we are seeking a healthier lifestyle it would be easier for us to accomplish if we spent more time (and money) in the produce section and less in the bakery section of the grocery store.

We cannot control all environments we find ourselves in, but we can adjust many of them to create an easier environment to behave the way we wish to behave. Becoming, improving, and accomplishing is often just a product of our small daily decisions.

Your Investment Environment

The investment environment is one that investors can control pretty easily. Most investors prefer peace to anxiety, stability to volatility. The markets, which are uncertain and volatile by nature, will not provide that. But choosing not to tune in, not to look at every move and sensational news headline, produces an environment much more conducive to feel peace and stability.

No matter what you are seeking to accomplish, changing your environment can be much easier than exercising willpower to act in the way you hope and wish to act. And when it comes to investing and financial matters, I am here to help you reach your goals, and help you feel confidence and peace along the financial journey.

– Scott

 

1. Clear, James. Atomic Habits. 2018

©2024 The Behavioral Finance Network. Used with permission.

A Robust Forecast for 2024

The brain may be filled with gray matter, but it hates gray areas. And there are few other places we find gray areas (uncertainty) than in the economies and markets of the world. One word of caution: our innate desire for certainty leaves us prone to fall for the illusion of certainty. Market and economic forecasts often provide an illusion of certainty.

As much as we wish it weren’t the case, the markets are unpredictable – evidenced by the fact that no one can consistently predict them with accuracy. Of course, a certain forecast will be right from time to time, just like a broke­n clock. But market and economic forecasts are not reliable prognosticators, no matter how much we wish they were.

Unlike market and economic forecasts, my forecast is reliable and robust because it is based on enduring investment truths and investor behavior.

My Forecast For 2024

In full disclosure, the following forecast is nearly identical to my forecast from last year and years prior to that.

  • The economy/market will do something that surprises us (and the experts)
  • The financial media will enrich themselves by emotionalizing headlines and short-term market moves to entice you to click and tune in. It’s nothing more than click bait
  • Investors who watch the news and stock market often will experience more stress than those that don’t
  • Investors that move to cash, waiting for a “better time,” will suffer significant uncertainty and anxiety about when and how to get back in
  • Your investment decisions and reactions to market events will ­­have a significant impact on your personal investment return
  • You will be tempted to change your investment strategy based on market performance, expert forecasts, and/or your personal beliefs about the future

Conviction, patience, and discipline are virtues every investor should develop. They aren’t easy, yet they are essential for your success. As your advisor, one of my most important roles is helping you ignore the noise and focus on what really matters to your financial success.

I wish you a prosperous, fulfilling, and happy 2024. Thank you for allowing me to be your trusted partner along the journey.

– Scott

 

©2024 The Behavioral Finance Network. Used with permission. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.

Increase Your Happiness by Expressing Gratitude

Tis the season of gratitude. Thanksgiving is perhaps one of the most underappreciated holidays, but most needed. Studies have shown that gratitude promotes many positive benefits – increased and lasting happiness being one of them.1

Happiness is a desirable state of being shared by all people – irrespective of culture, background, or religion. Unfortunately, the pursuit of happiness is often focused on circumstantial happiness rather than enduring happiness.

It is true that some circumstances result in happiness, but such happiness is often temporary in nature, and will change as the situation changes. Enduring happiness is what we really seek. It requires more effort, but it is not subject to the whims of our ever-changing circumstances. We can increase happiness in our lives, no matter where we are or what we are going through, by practicing and expressing gratitude.

Why is Gratitude so Difficult?

Practicing daily gratitude can be difficult. This is because we are never at our “ideal.” There is always something better that we are pursuing. Seeking improvement and progress is a wonderful endeavor, but we shouldn’t become so obsessed with “ideals” that we fail to reflect on past progress and those things we have been blessed with.

What do you do first thing in the morning? Many people check their phones to see news headlines of the day and work emails – things that are often negative and/or stressful. How do you end the day? When we engage in activities that are stressful and/or concerning, it can be more difficult to express gratitude.

Making Gratitude Easier

Engaging in morning and evening activities that are positive in nature can make it easier to express gratitude. Exercising, playing with an animal, engaging in what interests our kids, or writing in a gratitude journal can make it easier to feel and express gratitude.

What one thing are you grateful for today? A great question to reflect on every day. Such reflection encourages positive thoughts, feelings of gratitude, and ultimately greater happiness. Positive activities may take more effort, but it’s worth it!

Thank You

We are grateful for you. Thank you for your trust and confidence in us. Thank you for taking our advice, even when it goes against what may feel right. Thank you for being a patient investor – we know it’s not easy. And thank you for choosing us as your partner on this journey.

– Scott

©2023 The Behavioral Finance Network. Used with permission.
1. https://time.com/5026174/health-benefits-of-gratitude/

Magnifying the Present

It is human nature to focus more on the present than the future, which is in line with our basic instinct of survival.

We focus on the present because that is where “life happens” and we experience feelings such as pleasure, pain, anxiety, and peace. Every day we face cost-benefit tradeoffs that not only impact our lives today, but potentially for years to come. Because of our nature, we often select those things that bring immediate gratification while delaying its cost into the future.

Investing Tradeoffs

Perhaps the most frequent and material tradeoff investors face is whether to sell when markets go down and the outlook is negative (they receive immediate emotional relief) or remain disciplined to the strategy even as account values go down. The former is easy, the latter requires conviction and perseverance. The tradeoff comes down to emotional comfort today vs. potential for greater long-term returns.

“The real key to making money in stocks is not to get scared out of them.”
– Peter Lynch

Smart Today May Not Be Smart Tomorrow

We tend to extrapolate the present into the future, as if things will never change. When times are good, we feel good and may underestimate the risk. When things are bad, it’s about how much worse things are going to get – especially when you have exaggerated headlines that feeds into the doom and gloom.

But things change – they always do. We don’t know when or what may cause the change, but markets and economies are cyclical. What may seem smart today could end up being unwise and costly down the road. That is why your plan is so important. It is the anchor that helps us bridge the present to the future and helps us make sure the decisions we make today will be in your best interest tomorrow.

– Scott

©2023 The Behavioral Finance Network. Used with permission.

The Advantages of Low Expectations

We all want desirable outcomes – those outcomes that bring us happiness, peace, and prosperity. Because we desire such outcomes, we may go into situations having high expectations. But it may be more beneficial to temper our expectations if we want to experience greater contentment in life.

Disappointment & Contentment

Disappointment occurs when a situation or outcome is worse than we expected. By intentionally setting expectations low, such as expecting long lines at the airport and flight delays, we decrease the likelihood of becoming disappointed or angry when “life happens.”

Contentment, on the other hand, results from situations our outcomes that exceed our expectations. When we lower our expectations, we put ourselves in a position to be pleasantly surprised more often, such as when we breeze through security and our flight arrives a few minutes early.

When we set expectations for something, we should consider how much control we have over the situation. If we have a great deal of control, we may feel confident setting high expectations for ourselves. But when things are out of our control, we should consider keeping our expectations low.

Investment Expectations

Most investors want to achieve high rates of return with little fluctuation in value. Assuming a given (and acceptable) level of risk, the higher the return, the better. But we should be careful to keep our investment hopes and desires separate from our investment expectations.

When we temper our investment expectations, we are in a better position to handle market surprises. Every year the market surprises us. Tempered expectations empower us to enjoy the positive surprises and put us in a healthy mindset to handle and adapt to the negative surprises.

I have found that the best expectations for investors are a combination of realistic optimism for the long term coupled with the expectation that, in the short-term, markets may not make sense and often fluctuate considerably.

– Scott

 

©2023 The Behavioral Finance Network. Used with permission.

 

Recent Investment Advice From Warren Buffett

Investing may be simple in principle, but it isn’t easy in practice. Markets and economies are fraught with uncertainty, constantly changing news and markets, and how great some other investment is performing. Warren Buffett is one of the most successful investors of all time. From time to time he shares sage advice that every investor can benefit from.

Buffett’s Advice

I want to share two things that Warren Buffett said in the latest Berkshire Hathaway shareholder meeting. You will see that his counsel is not novel, nothing earth shattering. It is valuable because it helps us think about what really matters in investing and the approach we may want to take for our investment decisions.

“What gives you opportunities is other people doing dumb things… there’s been a great increase in the number of people doing dumb things.”

What kind of dumb things might investors do? In my experience, it almost always has to do with making hasty, emotional decisions. These decisions are often made in response to sensational news headlines, bold predictions, and/or recent market performance.

“The world is overwhelmingly short-term focused.”

Buffett doesn’t pay attention to short-term events, and he seeks to take advantage of those that do. These two comments provide insight to how Buffett has become such a successful investor. There is no talk of algorithms, trends, or fancy methodology. His statements are refreshingly simple.

Profiting From Mistakes

Investors often focus on how well a security will perform and work out in our favor. We seldom ask ourselves how a decision might be “dumb” or how much it could cost us, but that can be very helpful. Everyone makes mistakes. As investors, we can improve our game by minimizing our own mistakes while taking advantage of others’ mistakes.

Buffett’s advice really boils down to becoming a long-term focused investor. That means we do not allow the daily noise to distract us from our long-term view and investment strategy. Simple in principle, difficult in practice – yet potentially very rewarding.

– Scott

 
Source: 2023 Berkshire Hathaway Shareholder Meeting
 

©2023 The Behavioral Finance Network. Used with permission.