Fun isn’t a component of fundamentals.
The tedious, repetitive processes are critical for all aspects of success in life and your finances.
Nothing can substitute for getting your reps in.
The recent World Series between the N.Y. Yankees and Los Angeles Dodgers is a case in point.
Both teams possess prodigious talent, but the Dodgers know how to play the game.
The Yankees lineup includes three hitters who can mash the ball 500 feet.
Unfortunately, other aspects of their team leave much to be desired.
The Yanks led the league in time spent standing at the plate and admiring their HRs. They also dominated the category of flamboyant bat flips.
Focusing on style points doesn’t deliver championships. Their abysmal baserunning, fielding lapses, and lack of situational awareness sabotaged their championship dreams.
The Dodgers won four out of five games. In their previous two playoff series, the Yankees’ fundamental deficiencies were masked by playing two teams with payrolls that were a fraction of the Yankees’ 300 million plus yearly salaries.
The Indians and the Royals are young, hustling clubs that don’t have the star power to compete with the Yankees. The Dodgers did, and they also possessed a keen grasp of the fundamentals their opponent severely lacked.
The Yankees had a surplus of sizzle, but the Dodgers owned the steak. The results speak for themselves.
What does the World Series have in common with personal finance?
Plenty!
Too many Americans are concerned about what others think about the car they drive, their clothes, or the house they live in. Appearances matter more than substance. It’s not an intuitive concept, but real wealth is something people can’t see. Stocks and Bonds aren’t custodied in a Louis Vuitton Bag.
Lifestyle creep leads to the same result as the Yankees’ boneheaded baserunning: Failure to achieve the ultimate goal. Winning the World Series or saving for a prosperous retirement rely on completing the mundane reps and persistence, not an overabundance of talent.
Numerous real-world examples exist of ignoring the financial basics and gravitating toward the sizzle.
A high-paying job doesn’t guarantee financial success. Spending more or equal to what you earn ensures a roster spot on the Hedonic Treadmill or worse. The material perks of a high salary are enticing. Unfortunately, like everything else, nothing lasts forever. The lack of a cash reserve can lead to many unpleasant consequences when the unexpected occurs.
Source: Antonio Aguirre
The same goes for investing. Ignoring basic but boring concepts like a diversified portfolio often leads to disaster. Everybody looks like a genius during a Bull market. To paraphrase Waren Buffet, what matters is what your portfolio looks like when the investment tide inevitably rolls out. Government Bonds are boring but serve as a ballast to counteract market headwinds. In addition, bonds are an excellent source of dry powder for portfolios, enabling investors to rebalance into down markets and participate in eventual reversals.
Showboating and flashing your bling provide temporary pleasures.
Bat Flips don’t win championships.
The same goes for your finances.
Good investing and money management are supposed to be boring.
Don’t let anyone tell you otherwise,
