Fix It Friday Ep. 34 - Fix It Friday - Tied to the Mast

• Discipline beats emotion. Investors can undermine their own financial goals when they react to FOMO, fear, envy, or market predictions instead of following a long-term plan.

• Inflation affects purchasing power. Cash may appear stable, but rising prices can reduce what those dollars can buy over time.

• Long-term investing requires accepting uncertainty. Equity investing offers no way to capture potential returns while avoiding all volatility. Gains and setbacks are part of the same investment experience.

• A sound process helps investors stay the course. Behavioral investment counseling can help investors avoid impulsive portfolio changes and remain committed to their financial plans.

Disclaimer 00:00

The following podcast by Fusion Family Wealth LLC, Fusion, is intended for general information purposes only. No portion of the podcast serves as the receipt of, or as a substitute for, personalized investment advice from Fusion or any other investment professional of your choosing.Please see additional important disclosure at the end of this podcast. A copy of Fusion's current written disclosure brochure discussing our advisory services and fees is available upon request or at www.fusionfamilywealth.com.

Jonathan Blau 00:19

Welcome back to another episode of Fix It Friday. Today, the episode that I'm going to record is called Tied to the Mast, and it was actually inspired by the story of Odysseus, the legendary hero of Homer's Odyssey. It's a story that's recently found its way back into public attention through a new film adaptation, and that's kind of what catalyzed the idea.So Odysseus was no ordinary sailor. He was a king, he was a war hero, and he's one of the most respected strategists of his time, which is precisely why this lesson matters. When faced with the irresistible call of the sirens, Odysseus didn't rely on willpower. He didn't trust his immense intelligence and his past successes, thinking that that would be enough to get him through the storm. He didn't assume he was immune to temptation. Instead, he had his crew tie himself to the mast, and, and he had them promise, no matter w- how much he cried and begged, that they would keep him tied to the mast in the face of the siren calls. Because he understood something that investors often forget, particularly among the most wealthy and most successful investors in terms of th- their success achieved outside of the investment world. The laws of human nature don't stop applying simply because we've been successful, and he understood that the greatest risk wasn't the storm that was outside the ship. It was believing that when temptation arrived, he could simply rely on his own judgment and past successes to resist it. Today, we'll explore why that lesson may be just as relevant for investors as it was for Odysseus almost three thousand years ago.

Speaker 3 02:04

Welcome to the Crazy Wealthy Podcast with your host, Jonathan Blau. Whether you're just starting out or are an experienced investor, join Jonathan as he seeks to illuminate and demystify the complexities of making consistently rational financial decisions under conditions of uncertainty.He'll chat with professionals from the advice world, entrepreneurs, executives, and more to share fresh perspectives on making sound decisions that maximize your wealth. And now, here's your host.

Jonathan Blau 02:39

So in Homer's Odyssey, Odysseus faced an extraordinary challenge. He had to sail past the sirens. These creatures sang songs so irresistible that sailors would abandon reason, steer toward the sound, crash onto the rocks, and they'd perish. Odysseus understood something important. He knew he wasn't strong enough to resist. What I actually say is he had humility instead of hubris. Many successful entrepreneurs and business people don't have that kind of humility, and it's important to have in order to succeed with investing through all the siren calls that investors are faced with.So before reaching the sirens, Odysseus instructed the crew, as I mentioned, to tie him securely to the mast of the ship. His orders were very simple. Simple orders. "No matter what I say, no matter how much I plead, no matter how convincing I become, do not untie me." As the ship approached the sirens, Odysseus became overwhelmed. He begged, he screamed, he demanded that his crew release him. They ignored him. The ropes stayed tight, and those ropes actually saved his life. Investors have siren calls, too. The modern investor faces the following sirens: financial television and media, market forecasts and predictions, political headlines, predictions of recessions, of crashes, of booms, and of the next great stock, and perhaps the most powerful siren of all, FOMO, the fear of missing out. The big irony is that FOMO doesn't usually appear when investors are losing money. It appears when somebody else they know or are watching seems to be making it, a neighbor, a colleague, a friend, sometimes someone who appears less intelligent or knowledgeable, less experienced, and perhaps even less disciplined than they are. An investor suddenly finds themselves thinking, "How can that be person getting richer than me? Maybe I should be doing what they're doing. Maybe I need more tech stocks. Maybe I need more crypto. Maybe I need whatever is going up the fastest right now." At the moment, the investor is no longer focused on their long-term plan. They're focused on a short-term emotion. They're no longer trying to achieve their own goals. They're trying to relieve the discomfort of watching someone else, someone they think may not be as capable or competent as they are, appear to be winning, winning at a greater level than they are. But investing isn't a competition against your neighbor. It's a process of achieving your own financial goals. When investors abandon a well-designed plan because someone else appears to be getting rich faster, they almost end up solving the wrong problem. They weren't behind. They became distracted. The sirens don't lure sailors with logic. They lure them with emotion, and FOMO may be among the most seductive song investors ever hear. The greatest external threat that investors face is not volatility. That is not the biggest threat. It's a perception among investors and those in the industry who sell investment advice or offer it that, that it's the biggest threat, but it's not. Inflation is the biggest threat.

Jonathan Blau 05:44

It quietly destroys the value of every one of our dollars, and it works every day, whether markets are open or closed, whether you're paying attention to it or not. Cash appears safe because the, uh, balance in your account doesn't move very much to the extent it's in cash. But cash merely freezes your money in place. While the principal remains relatively stable in terms of not fluctuating, inflation continues to eat away at the value of every dollar that you own to the tune of at least three percent a year compounded. That's not wealth protection. That's purchasing power erosion or wealth destruction.Historically, broad equity ownership has been among what has offered investors the most effective long-term defenses against inflation because businesses grow earnings and dividends and grow their values over time. The ride is definitely bumpier in equities than it is in cash or bonds, but that bumpiness has historically been associated with significantly higher long-term returns.When you buy a stock, you become an owner of great businesses. When you buy a bond, you're primarily lending money to those businesses. Owners participate in the growth of productive businesses. Lenders receive fixed, frozen, in terms of the level of them, payments. Both have their place, but for investors whose primary objective is long-term wealth creation and purchasing power protection, history has repeatedly shown time and again the power of ownership.Stocks have never been successful because they avoid volatility. They've been successful because businesses innovate, grow, adapt, and they compound. Many people say successful investors earn their long-term returns despite market declines. I would argue the opposite. They earn those returns because they expected market declines and were willing to deal with the ambiguity involved with receiving those market rewards, meaning when the declines would interrupt the compounding was dealt with in a way that investors to stay the course. They understood that periodic corrections, bear markets, recessions, and moments of fear were not evidence that investing is now failing. They were evidence that investing was working exactly as it always has for hundreds of years.There's no version of equity investing that includes all of the returns and none of the volatility. That package doesn't exist. The returns and the volatility come together in one package. The prosperity and the uncertainty also come together. The gains and the setbacks come together. You either accept the entire package, or you don't receive the benefits of the package at all.Investors who successfully protect and grow wealth over decades understand this. They stay invested through every ounce of the temporary ups and downs surrounding the permanent upward force of compounding. This is where behavioral investment counseling becomes so important. Our job isn't to predict recessions. Our job isn't to predict recoveries. Our job is not to identify the next hot investment.

Jonathan Blau 08:51

Our job is to be the crew that ties the investor to the mast, to help investors remain tied to a rational long-term plan when fear tells them to sell, to help investors remain tied to a rational long-term plan and when envy and greed tells them to speculate, to help investors remember that temporary fluctuations in portfolio values are not the enemy. The real enemy is abandoning a sound plan in response to those temporary emotions.A behavioral investment counselor can't eliminate volatility. They don't have to, but they can help investors avoid mistaking volatility for failure. And they also help investors avoid making volatility dangerous by responding to it in a way that leads the investor to change their portfolios in response and disassemble their long-term plan that was designed to give them the highest probability of success in the first place. Odysseus survived because he understood something most people simply don't. Willpower itself is unreliable. Systems are powerful. The investor who relies on emotion will eventually follow the sirens. The investor who relies on discipline, process, and sound counsel has a far greater chance of reaching their destination 'cause the greatest threat to wealth has never been the storm outside the ship. It's always been the temptation to jump overboard before reaching shore.Thank you for tuning in to another episode of Fix It Friday. You can catch us on crazywealthypodcast.com, fusionfamilywealth.com, and all of your favorite podcast venues. I hope everybody has a good fall.

Speaker 3 10:33

Thank you for tuning in to another episode of The Crazy Wealthy Podcast. For more insights, resources, and to sign up for our newsletter, visit crazywealthypodcast.com. Until then, stay crazy wealthy.

Speaker 1 10:53

The previous podcast by Fusion Family Wealth, LLC, Fusion, was intended for general information purposes only. No portion of the podcast serves as the receipt of or as a substitute for personalized investment advice from Fusion or any other investment professional of your choosing.Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy or any non-investment related or planning services, discussion, or content will be profitable, be suitable for your portfolio or individual situation. Neither Fusion's investment advisor registration status, nor any amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Fusion is engaged or continues to be engaged to provide investment advisory services. Fusion is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he or she will experience a certain level of results if Fusion is engaged or continues to be engaged to provide investment advisory services. A copy of Fusion's current written disclosure brochure discussing our advisory services and fees is available upon request or at www.fusionfamilywealth.com