Should I be worried? An investor litmus test
As a child, I remember seeing my mother’s wooden plaque of The Serenity Prayer that she kept above our kitchen sink. For those not familiar with this popular prayer, it reads:
“God grant me the serenity to accept the things I cannot change, the courage to change the things I can and the wisdom to know the difference.”
The Serenity Prayer has a simple but profound message: change what you can and leave the rest behind. As it turns out, a very similar sentiment also applies to investing.
Jason Zweig says it well in his, Statement of Principles:
“Successful investing is about controlling the controllable. You can’t control what the market does, but you can control what you do in response. In the long run, your returns depend less on whether you pick good investments than on whether you are a good investor.”
Keeping Zweig’s framework in mind, let’s take a look at what is and is not in our control as investors.
Things you can control:
- Your savings rate
- Having a formal financial plan
- Creating realistic financial goals
- Discipline around staying the course
- The type of financial media you consume
- Your emotions
- Trading frequency (less is more)
- An awareness of your risk taking preferences
- The fees you pay for advice and financial products
- Using tax advantaged investment products
- The degree to which you are diversified
- Educating yourself about investing basics
- Continuing education to increase earning potential
Things you can’t control:
- The trajectory of the market broadly
- Acts of God
- Federal Reserve interest rate decisions
- The behavior of politicians or CEOs
- The timing of the next bear market
- Geopolitics; war and peace
- The housing market
- Catastrophic headlines
Armed with this knowledge, take a look at the list of “can control” items above and ask yourself what steps you could take today to get greater control over your finances. Next, review the list of “can’t control” items and honestly assess how often you worry about them. If you’re like me, I imagine it’s more often than you’d care to admit. The next time you find yourself worrying about something that is out of your control, I’d challenge you to refocus your efforts on something that is in your power, like deepening your understanding of markets, increasing your own level of workplace training, or increasing your monthly contribution. Doing so will improve your likelihood of reaching your financial goals and may even provide a little serenity, now.
The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a registered investment advisor.
Tagged: behavioral finance, Dr. Daniel Crosby