Love and money have a lot in common. It struck me how similar these two pursuits are while reading a recent Wall Street Journal article on the pursuit of a satisfying life by Charles Murray. We seek both love and money over our lifetimes; we’re drawn to them, fight over them, agonize over them, neglect them and lose them on occasion, and then seek them again.
Mr. Murray’s new book, “The Curmudgeon’s Guide to Getting Ahead,” is primarily targeted at young people to help transition them from college to a working life. He tackles many thorny issues such as workplace politics, thinking and writing well, marriage, money, religion and the pursuit of happiness. Murray believes most of the clichés are true when it comes creating a life filled with deep and lasting satisfactions.
In love, Murray recommends finding someone that you really, really like. Pick a partner who has similar tastes and preferences. Forget trying to change a person to be your perfect mate because that doesn’t work. Personal habits that you find objectionable today are often future deal-breakers. Looks are important – but not that important.
While reading this (or anything for that matter), my brain starts making parallels to what I do for a living — helping people become better investors. The clichés that guide love can easily be retrofitted to investing. Here are a few: know yourself well enough to find an investment philosophy that you can live with; pick a strategy you understand and that matches your beliefs; don’t chase hot trends looking for immediate gratification; and the benefits of a long-term relationship trump a one-night stand.
I became a successful investor only after realizing that I had no special insights into the financial markets despite my brilliance, charm and good looks. I did pick a few winning stocks and mutual funds in my day before admitting that it was luck and not skill. Then I had an epiphany and realized that it was okay to have an overly-inflated opinion of myself in some parts of life that didn’t matter much, but not when it came to money (or to love).
A portfolio of index funds works well for me. It’s a simple, low-cost and easily maintained solution to an important task that must be dealt with properly. An index fund portfolio earns market returns, and that’s better than even my incredibly high IQ could ever achieve. Since I didn’t need to rack my brains trying to outguess the markets anymore, I could use it for more intellectual pursuits, like trying to convince other people to use index funds.
Mr. Murray also talks about being happy in a career. Forget fame and fortune. Young people tend to be ambitious — they devote intense energy to pursuing their dreams of success, as they should. But by age 40, the wisest among us recognize their potential. Some might be rich, famous or both. The rest of us need to make peace with ourselves and appreciate what we have achieved so far and what we’re likely to achieve in the future.
I always thought that age 40 was an important milestone in investing also. By this age, we’ve made our share of investment mistakes. Perhaps selling stocks during the financial crisis only to see the market recover and hit new highs, or bought gold at $1,800 only to watch it sink to $1,300, or jumped into emerging market stocks at their peak. Bitcoins anyone?
By 40, you should be ready to dispense with any notion that you have the Midas touch. You’re not the next Warren Buffett. At 40, you’ve got another 25 years or so before retirement. Use this time to get serious with the business of investing. A low-cost index fund portfolio makes a lot of sense.
In closing, Mr. Murray offers some unusual advice, “Watch ‘Groundhog Day’ repeatedly.” The movie “Groundhog Day” was made more than two decades ago, but there are many lessons to be learned from its comedic script.
Bill Murray stars as an egocentric TV weatherman who is sent to Punxsutawney, PA, to cover Groundhog Day. He hates everything about the assignment: the town, the locals, the groundhog. He does the shot and can’t wait to get back to the city. However, a snowstorm strands him in the town overnight. When he wakes up the next morning, it is Groundhog Day again, and he relives it. This goes on for years and years until he finally accepts who he is, where he is, and finds true happiness.
What does this have to do with investing? I graduated from college in 1980 and made my first stock investment in 1984 based on a tip in a popular financial magazine. I lost it all. If I were to do it again, I’d put my money in the Vanguard 500 index fund. I’d be a much wealthier man today if I was smart enough to buy index funds back then.
I’m planning to live for at least another 30 years and know how my money will be invested. It will stay in a portfolio of low-cost index funds. This strategy will outperform anything I could ever do in the markets. Any inkling of achieving fame or fortune in the financial markets left my body a long time ago.
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