Money Matters by Susan Hirshman
It's the start of a new year and practically every morning show is talking about diets and exercise - even CNBC. Yes, CNBC one of cable's top rated investment shows featured Tony Horton, creator of Power 90X programs. On the show, he talked about his programs as well as mentioning that his 11 laws for healthy living.
As the author of Does This Make My Assets Look Fat?: A Woman's Guide to Finding Financial Empowerment and Success, a book that educates women on investment management through the prism of healthy dieting, I just couldn't resist. I ran to my computer, visited his web page and glimpsed at the laws to find out if they were analogous to successful investment management.
Lets have a look see...
Law #1 - Variety is the spice of fitness: His message is you should not only do one type of exercise. By doing the same thing over and over again you subject yourself to training injuries, plateaus, and boredom.
Analogous to successful investment management? Definitely. One of the key investment principles is to avoid concentrated positions ( ie. being invested in one stock, or one specific part of the market etc) Otherwise, you subject yourself to greater risk than if you had a well allocated and diversified portfolio.
Law #2 - Consistency. Tony believes that consistency will coalesce into results.
Analogous to successful investment management? Yes. Research shows that those investors who have a realistic plan and stick with the plan even in times of volatility have a better probability of success than those who are constantly trying to time the market and chase returns.
Law # 3- Intensity. The concept here is to control the things that you can control.
Analogous to successful investment management? Absolutely. You can't control the markets, you can't control the economy - but what you can control is your spending, your saving, your asset allocation and your emotions. Have those in check, and you are ahead in the game.
Law #4- Purpose. Your purpose is to have a better life. Your reasons why have everything to do with your level of success.
Analogous to successful investment management? Need I say anything more.
Law #5: Reality - Be realistic with what you want to achieve.
Analogous to successful investment management? Without a doubt. When people are unrealistic with their goals and their return expectations, that's when we see them making bad and even harmful decisions.
Law #6 : Play - If you shift to a mind-set of playing and having fun, you won't obsess as much about calories, inches, and weight loss.
Analogous to successful investment management? Yes indeed. Your mindset plays a huge role in your financial success. It is a constant battle between your long term needs and your short-term wants, and thus your focus needs to be on what you are getting vs what you are giving up today.
Law #7 - Success comes from planning ahead. You can't have a fit, healthy lifestyle if you don't have a long-term plan. Stop winging it, and make sure to schedule all of your workouts in advance.
Analogous to successful investment management? Sure. Just replace the word lifestyle with financial life and you have the number one rule of financial success.
Law #8 - Stress Less. Stress comes from our reaction to the stressor. You choose how you respond to stressful events. And this response profoundly affects your success.
Analogous to successful investment management? Undeniably. The way you react to market volatility has a huge impact on your success. A study from Dalbar tells us exactly that - it shows that over the past twenty years the typical equity mutual fund investor had a 1.8% return while the market had an 8% return. Why the vast difference - buying high and selling low - in other words letting your emotions dictate your investment decisions.
Law #9 - Love it:, then you'll discover a fitness philosophy that you'll stick with for a lifetime.
Analogous to successful investment management? Certainly. You don't have to love investment management, but you have to feel very comfortable with your plan in terms of timing, dollar amounts and risk profile. That is the only way you will stick with your plan.
Law #10 - Maintain flexibility. Flexibility is the key component to becoming less vulnerable and more durable, no matter what your age.
Analogous to successful investment management? Undeniably, for two reasons. First, a financial plan is not a static document, it changes and adapts to your changing life and financial situation. In addition, the goal of planning is to give you flexibility or choice now and in the future so that you are less vulnerable and more durable no matter where you are in your wealth cycle.
Law #11 . The right fuel supplies proper energy and recovery through balanced brain chemistry.
Susan Hirshman is president of SHE LTD, a consulting firm focused on enhancing the financial literacy of women globally. She is the author of- Does this Make My Assets Look Fat? - a women's guide to finding financial empowerment and success. Formerly, she was a Managing Director, Wealth Manager with one of the world's top financial services organization.