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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

As the year comes to an end, it’s a good time to reflect upon the year behind us. The good things, the bad things, and the success we achieved along the way.

Sometimes we rely upon favorable circumstances to achieve success, but circumstances are often beyond our control. While our circumstances can make it easier or more difficult to achieve success, they do not create success on their own. Researchers have found that mental toughness and perseverance predict our level of success more than any other factor.

Making Your Own Success

Jeff Olson, author of The Slight Edge, found that our personal success in life comes down to a simple formula. We generally know what activities will produce success in a given realm. Then we just apply the formula – Create simple daily disciplines and do them without fail. Notice the word “simple?” These should be small things you can do daily.

Success isn’t a secret formula. Often the greatest difference between achieving average results and being successful comes down to consistently doing the simple daily disciplines, the daily habits. These habits may not appear to be working in the short-term, but they will compound over time. Having perseverance and mental toughness is crucial to achieving success.

Success in Investing

The media often refers to “smart money.” I don’t know why because they are known to make some pretty costly decisions. And intelligence has very little to do with investment success. Warren Buffett said that once you have an average IQ, what sets apart successful investors is their ability to control the urges that influence us to make unwise financial decisions.

These urges are natural, and they are hard to fight off. It takes mental toughness to ignore the feelings and headlines. It takes perseverance to remain disciplined and patient when the market is irrational.

But that is why you have me! I understand the urges, how we can alleviate them, and remain focused. I am here to help and guide you along your financial journey. Just like with a personal trainer, sometimes it is easier to exhibit mental toughness and persevere when you have someone cheering you on. Onward and upward!

– Scott

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

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

Why is it that many investors feel the urge to time the stock market? Since 1950, stocks have been in a bull market 83% of the time – despite all the crises and corrections.¹ You would think investors would be happy with that kind of result. But that isn’t the case. Investors spend a lot of time and energy attempting to avoid losses, which ironically, leads to lower long-term performance.

The Cost of Timing the Market

Morningstar recently released their annual Mind the Gap report, which compares investor performance with the underlying investments. They found that, over the last 10 years, investors underperformed the very funds they were invested in by an average of 1.7% per year.² This finding is not unique as it confirms what Vanguard also found.³

This underperformance is largely attributed to the timing of purchases and sales of securities. Investors are influenced to buy after things go up (chasing what is hot) and sell after experiencing losses as investors attempt to “get to safety.” But with a market that is historically positive most of the time, why do we feel the urge to try to time it?

Thank Your Brain

Our desire to avoid all losses, even losses that may be temporary, is driven by the way we are hardwired. Our brains are sensitive to financial loss because they are viewed as a threat. They threaten our comfort and potentially our livelihood. And what does the brain do with a threat? It seeks to avoid and eliminate it. Therefore, the urge to time the market is completely normal and natural. But that doesn’t mean it is beneficial.

Investors may wish to exert greater control over these urges so they can make better investment decisions. I think that is a wonderful endeavor, but it is difficult! You need almost superhuman willpower to overcome these innate urges.I have identified two ways that make it easier to control the urges to time the market:

– Scott

1. Callie Cox, eToro, tweeted data on June 12, 2023 found at https://twitter.com/callieabost/status/1668360824593809410?utm_source=substack&utm_medium=email
2. Morningstar, Mind the Gap, July 31, 2023
3. Vanguard, Advisor’s Alpha, July 2022

Time is an interesting dimension. It is a fixed measurement, yet our perception of time varies greatly depending on what we are doing.

It has been said that the longest eight seconds in life is riding a bull. I never rode a bull and have no interest in testing that statement for myself. So, I will take it as fact. But even so, eight seconds is eight seconds – regardless of what we are doing.

It’s About Perception

Time seems to “fly” when we are engaged in a fun, exciting, or stimulating activity. And it appears to stand still when we are scared, anxious, or bored. In other words, the things we enjoy in life make it “go” quickly, while the things we dislike seem like they last for an eternity.

This means that when we are engaged in desirable activities, such as summer vacation with the family, it may be worthwhile to take a moment to slow down and reflect on the experience. This will allow us to relish the moments and the subsequent memories – which we can call upon during the more difficult times.

Slowing Down & Investing

Slowing down can also help us make better financial decisions. Financial information comes at us quickly, and because it has to do with gains and losses, can cause us to become emotional. Responding immediately is a natural impulse and can feel great when we are emotional, but it is seldom beneficial…especially when it has to do with money.

Slowing down empowers us to take a more mindful approach to the decision at hand. We are constantly bombarded by the news du jour, brash opinions, and impulses to respond quickly. How does one slow down? The first step is to commit to make more mindful, less emotional financial decisions. The next step is to contact me – I will help you through the process.

One of the things I love most about being an advisor is helping investors ignore the noise and take a more deliberate and mindful approach to their decision-making. It not only improves decisions, it also improves the investor experience. I am here for you!

– Scott

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