Financial markets can sometimes resemble an apocalyptic wasteland teeming with the unknown and danger. To survive you must have courage, common sense, and the ability to keep cool under heat. Mad Max A.K.A., “The Road Warrior,” has many of the qualities of a successful investor that you would be wise to emulate. In honor of the fourth edition of the series “Fury Road” coming out this Friday, here are some investment tips courtesy of Max.
1. Have confidence but plan for the worst. Though Max has the cunning and weaponry to survive among the roaming bands of Uber-Thugs prowling the wasteland, he has a back-up plan. For instance, he has a bomb attached to his souped-up V-8 interceptor vehicle. Though this car is his pride and joy, if things go wrong he has an exit plan to live to fight another day.
This is no different from an investor setting aside cash to cover 3-6 months of unemployment. The idea of including high-quality bonds as a significant portion of your investment portfolio also falls under this category. One never knows when the mohawked hoodlums will ride into town. Always have a plan to deal with uncertainty; whether in the world of investments or in the burned up Outback, this may save your life.
2 Chart your own path. Max knows, in the end, he is responsible for his own decisions. He could join “The vermin on wheels” and roll with Lord Humongous. Conversely, the hot woman with the crossbow could provide some needed comfort. He chooses neither and decides to chart his own path.
This same skill applies to investing. Doing your own research and being responsible for your investment decisions are traits of successful investors. Though it feels comfortable to join the crowd and lose money with some company, this will get you nowhere fast. Be like Max and learn to be happy being a loner with your opinions.
3. Don’t pay attention to market noise. Max only speaks when he has something to say. His classic “If you want to get out of here, talk to me,” sums up the power of limiting your words. People pay attention when he speaks because it is a rare event and it signifies importance.
Investors could learn from Max by remembering this when dealing with the financial media. Financial pundits and forecasters ALWAYS have something to say about the markets. Cable news runs 24/7. The volume of words spoken is inversely correlated to meaning, when it comes to daily commentary.
You don’t have to go to extremes like Max (e.g., threatening to shoot the helicopter pilot when he does not shut up). You could follow Humongous’ advice and “just walk away” when the usual suspects appear on your T.V. screen.
4. Keep your costs low. Max has no friction to slow him down. He knows he has to move fast and resources are meager. He cannot afford to waste anything in this primal world. He sleeps in a car and eats dog food out of a can.
Investors could pick up a few things from this extreme behavior. Most fair people would agree that the most important factor in determining your return is investment costs. Limiting these costs by reducing taxes and fees could add several percentage points to your portfolio’s return. Buying low-cost index funds is a lot easier than eating Alpo and sleeping in your Taurus.
5. Understand what is important and prioritize. Max knows everything in this new world revolves around precious gasoline. There is no escape and no hope without it. Everything he does is based upon acquiring resources and anything that interferes with this is discarded.
Investors need to be as disciplined as Max. Prioritizing retirement savings over college planning and creating an investment policy statement are just two ways you can stay on the right track. Distractions, such as currency trading, IPO’s and penny stocks will lead to portfolio depletion. Don’t let your portfolio slowly bleed to death by diverting from your main priorities.
Use this knowledge learned from Max to avoid an investor’s version of “rabble on wheels”, A.K.A. conflicted financial salespeople. Like the predators that rule the wasteland, these people are trained to separate you from your most precious resources in their own zero sum game.
Let “The Road Warrior” be your guide in fueling your own V-8 Interceptor and escape the clutches of greed instead of post- apocalyptic mutants!