This month we’ve talked a lot about the tortoise and hare methods of investing. For our purposes, the hare is the speculator, and the tortoise is the investor. This week I’d like to share with you my specific approach to tortoise style investing called “date-specific, dollar-specific investing.”
Before I define “date-specific, dollar-specific investing,” let’s look at the basis of my investment philosophy. I want you to think of this blog post as a guide to my approach, which in a nutshell is, investing for outcomes. Now, while I didn’t coin the date and dollar phrase, a multitude of evidence and academic research exists that supports this method. I believe that defining investment goals and investing specifically for those date and dollar goals are the best way to create positive lifetime investment outcomes for my clients.
Let’s start with what “date-specific, dollar-specific investing” means. To understand this type of investing, here are three points that need consideration.
- Focus on what we can control. This means we look at your financial goals, what part of your life they affect, when you need/want to achieve this goal, and the amount of money required. Once we create a date and dollar timeline, we are ready to start investing for these specific goals, which can be anything from saving for retirement to a new house, college, a car, emergencies, etc.
- Stick to the fundamental truths of investing. This means save early and often. Create a diversified portfolio. Minimize taxes and fees. Protect against major losses. Rebalance regularly. And since I know by now, you expect me to say this, IGNORE THE MEDIA NOISE! This approach is not flashy, and it can take time, so patience is required. However, history shows that by considering these things, outcomes improve. Essentially, bet on the tortoise.
- Investing isn’t easy. That is why we encourage you to leave the heavy lifting to us. By creating trust through honest and straightforward communication, we can make better investment choices for you.
Let’s take a closer look at what goes into this type of investing. Remember, having a portfolio is not the same as having a plan. Investors who follow a goals-based financial planning strategy achieve returns on average 1.65% per year higher than those who do not.¹ Retirees who follow a goals-based financial planning strategy can generate 22.6% more income.¹
To properly follow the date/dollar method, we take three essential steps, and I touched on these a little bit already. First, we need to set specific and measurable goals. Next, we create a dollar/date-specific plan for those goals. Lastly, and probably most importantly, we stick to the program. Sure, a hare may pass us here and there, but history shows us that the tortoise is the one who has the last laugh.
When we talk about setting goals, we start with turning your dreams into times and dollars and then creating strategies that seek to achieve these goals, but the critical part of this task isn’t the goals or the plans. Instead, it is changing your mindset and behavior patterns so that you stay on track with your plans and are better able to purse your goals. It is here where I act as your coach and help you keep your eye on the prize.
Making strategic investment decisions in line with your goals, timeframe, and risk tolerance is done through diligent asset allocation. These allocations are customized specifically to your needs and goals. When we decide what investments to put in your allocation, we select products that have historically shown solid long-term performance so that your goals stay within reach.
Throughout the life of your date and dollar-specific plan, tactical decisions will need to be made. Therefore, we monitor all plans diligently and make changes as needed. As we all know too well, you can’t predict what the markets will do or what will affect them. It is critical to remember that these events don’t need to define your investment strategy’s success or failure. And you all know what I’m about to say now. It’s also important to remember that what the media tells us is rarely necessary, so stay clear of emotional investment decisions; they are never good ones.
There you have it, the inner workings of the mind of Jason Grover! All jokes aside, this process defines tortoise vs. hare investing for me. I love this chart from OfWealth, it looks at the characteristics of tortoise and hare investors, and it nicely sums up the behaviors needed for successful investing.
Stay tuned next month for a brand new blog series for May!
P.S. If you enjoyed what you've read here and found it beneficial, we encourage you to share it with your friends and family. I firmly believe that an educated investor is a healthier and more confident investor.
Until next time…
Source: ¹Blanchett & Kaplan 2012, Blanchett 2015
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.
Investing involves risks including possible loss of principal. No strategy assures success or protects against loss. All performance referenced is historical and is no guarantee of future results. Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market. Bonds are subject to market and interest rate risk if sold prior to maturity.