In 1959, new coach Vince Lombardi in his first meeting with the Green Bay Packers, held up an oblong, inflated pigskin and said, “Gentlemen, this is a football.”
The story is most likely apocryphal, but it sounds like something Lombardi might have said. His dedication to the basics of football, including hard work, are what turned the 1-10 Packers into a 7-5 team his first year.
It’s been proven again and again that the pursuit of simplicity is a successful strategy for nearly every area of life, from a person’s daily routine to the products created by a global corporation. Yet many people don’t believe it.
Saying that you’re going to follow a simple plan makes it sound like you’re being unsophisticated, even simple-minded.
Ironically, keeping things simple is the best way to deal with complexity. And this is especially true in investing where the movement of individual stocks on any given day and the market itself in any given week is far too complex for anyone to predict.
However, people tend to believe just the opposite: If the markets are so complex, it must take a complicated strategy to beat them.
John Reese, writing for The Globe and Mail, points out that professional fund managers play on this perceived need for complexity to wow investors, including sophisticated mathematical models and strategy desks filled with high-paid PhDs. “After all,” he writes, “as an investor, you want to believe you are getting something extra for paying those fees.
But the reality is that active managers have had a tough time over the long term beating their benchmarks, despite all their in-depth research and sophisticated portfolio modelling.
The Stoics were ancient Greek philosophers who are seeing a renewed following today because their outlook is relevant for our current uncertain situation. They urged their followers to maintain simplicity, focus, and discipline no matter what was going on around them.
Epictetus, a Stoic, said, “It’s not what happens to you, but how you react to it that matters.” Seneca, another Stoic, said, “We suffer more in imagination than in reality.”
These two timeless quotes could be great to recall next time you see the media sounding the alarm over market volatility.
Research has shown that the most likely plan for success for an individual investor is simple: invest as much as you can, as diversely as possible, and persevere with your long-term plan no matter what the market or other investors are doing in the short-term.
I can customize that plan to fit your unique income, life-stage, risk tolerance, and investing time horizon. And then help you stoically stick with it.