Wisdom from a Yogi was originally published in the Knoxville News Sentinel
Lawrence Peter “Yogi” Berra died last year at age 90. Without question, he was one of the greatest Major League Baseball players of all time, but he would have also made a great financial planner.
In 2016, consider the financial wisdom of his famous “Yogisms:”
“90% of the game is half mental.” It is true that domestic and foreign economies are slowing, but there are also many positive economic indicators still present. Thus investor anxiety is fueling the drama that is trumping the data (no pun intended). Emotions such as fear and greed often overcome the fundamental soundness of a sound financial plan.
“It’s Deja vu all over again.” In an all-too-familiar pattern, investors who poured money into U.S. stocks over the past five years as prices climbed are now selling billions of dollars of stocks as their prices have declined. Effectively, buying high and selling low.
“If you don’t know where you are going, you’ll end up someplace else.” A lack of clear financial life goals is more harmful than the temporary stock market declines. Without goals that are defined in dollar terms and time frames a family tends to over-spend and under-save and make poor financial decisions. Goals can motivate our progress and create an accountability structure for decision-making.
“The future ain’t what it used to be.” The only constant is change. The only certainty is uncertainty. Looking back through history, we see that every decade had its highs and lows. Unexpected events are frequent. Wars, natural disasters, bankruptcies, recessions, and scams are countered by growth, innovation, successes, profits, and breakthroughs.
“A nickel ain’t worth a dime anymore.” Maintaining your standard of living is one of the primary objectives of your financial plan. Most of us equate financial security and independence with our peace of mind. The silent thief, robbing your peace, is not stock market volatility it is inflation. Every year, elements of our lifestyle increase in cost – healthcare, education, food, etc. – possibly diminishing our standard of living. Ironically, stock investing has proven to be an effective inflation-fighting strategy as part of a long-term financial plan.
“When you see a fork in the road, take it.” This year, you have a choice, succumb to fear and anxiety or take a different road. Choose to be patient and disciplined. Rebalance and diversify at lower prices (buy low). Control what you can control – your emotions, your spending, and saving, as well as your portfolio’s tax efficiency and investment costs.