What Can You Control In Investing? | AWM Insights #121

You should be investing, but that doesn't mean you have to settle for a poor investing experience. The broker selling you the next hot stock or Jim Cramer telling you to “buy, buy, buy” will not deliver the good experience nor the optimal returns you deserve.

Too many investors hear about the newest hot stock on the golf course or in the locker room. They then go out and buy it. This is the worst way to invest because there is no foundational plan. 

Actively implementing a sound investing process involves minimizing taxes, reducing expenses, and eliminating frictional costs to your returns. It also keeps emotions in check and reduces anxiety or uncertainty. This is the process of building a bullet-proof financial structure. 

The foundation for multi-generational wealth starts with focusing on what is controllable and through this process the value system is created, which can then be repeated generation after generation.

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EPISODE HIGHLIGHTS:

(0:47) Over the past few weeks we’ve gone over the lessons of embracing market pricing, don’t outguess the market, and not chasing past performance. Embrace the power of markets working for us.(1:18) Don’t pick stocks. The data is proven you will underperform the index.(1:43) Jim Cramer yelling buy, buy, buy about stock or a Goldman broker pitching the next IPO is all nonsense.(2:15) What are the things you can actually control in the investing process?(2:48) Taxes are a huge impact and should be considered in investment decisions.(3:00) Expenses in the form of expense ratios you pay for mutual funds or ETFs. Keeping these low will help them not to eat into your returns.(3:55) Putting the focus and emphasis on what you have control over leads to higher confidence of achieving priorities. You don’t have to guess which way the market is going daily, weekly, or even monthly.(4:10) Financial structure is having a sound in place that provides the foundation for investing. It is what gives the discipline to shoot down the golf course chatter about a hot stock or mutual fund.(5:21) The right process will give you better expectations of success because of the discipline created in that very same process.(5:49) Only optimizing for costs won’t result in better returns. Optimizing for the value created should always be the standard.(6:40) Chasing lower costs is directly correlated with poorer outcomes. Qualified advisors add value far above their costs.(7:06) Trades are usually “free” but there are still implicit costs like the bid-ask spread. These frictional costs seep out of your returns over time.(8:00) Expense ratios, trading costs, and taxes are all frictional costs that hurt the growth of your investments. The compounding effects over long periods of time cannot be ignored.(8:57) Global diversification and discipline must be foundational to your investment philosophy. It’s too easy to wander off track if you don’t establish the discipline.(9:35) The end client/investor is always in control of their financial structure. You have to be an active participant in this process.(10:25) Your assets both human capital and financial capital should be managed in a way that gives your the best chance of success to meet your goals. This is the customization and investing experience you should expect.(11:25) A better investing experience means higher confidence in reaching your goals. It is optimizing for you the individual family, not for standard deviation or market volatility.(11:47) The foundation for multi-generational wealth starts with focusing on the controllable and establishing a value system that can be repeated generation after generation into the future.