Does Your Portfolio Need That New Fangled Gear?

enjoy-wealth-14 steps to streamlining your investment tackle box so you won’t be a ‘page 29 guy’

Key Takeaways

Whether fishing or investing, don’t get seduced by the fancy, but unnecessary new tools on the market.
Understand what you buy and why.
Learn from your mistakes.

I introduced a very good friend of mine to fly fishing years ago. As often happens with newcomers to the sport, he was immediately hooked and decided that he should have his own gear right away rather use my borrowed equipment. So he walked into the local fly shop, opened the fishing catalog and said, “Make me look like page 29!”

The shop owner was only too happy to sell my friend everything he had in stock that looked like what was shown on page 29 of the catalog. It didn’t matter if my friend really needed it or not. Over time, my friend realized that he didn’t need everything he bought that day in the fly shop and started divesting himself of some of the more esoteric accoutrements, like the fish stomach pump (Yes, here is such a device!). Today, my friend still fishes, but he does so in a very streamlined and efficient way. A few flies, a couple of spools of tippet, etc. That’s all he needs and he does it well.

As regular readers of this blog are aware, investors and fishers have a lot in common. They know they need “gear” to get the best results, but they tend to succumb to “shiny object syndrome” and get seduced by the newest, fanciest-sounding products on the market. So, when they walk into the investment world’s version of the fly shop, they end up buying the highest-cost “solutions” on the market even though they don’t necessarily need them—let alone the cost.

How many of these “gadgets” do you have in your investment tackle box: Market timing strategies, indexed annuities, fancy option strategies, hedge funds of funds and the like? What they have in common is that they’re generally expensive, aren’t used well and never seem to be cost-effective.

4 steps to streamlining your investment tackle box

The good news is that there are a few steps that investors can take that will help them avoid accumulating too much expensive and ineffective investment gear.

Step 1. Understand what you are buying. If it sounds too good to be true, it probably is. Cast your line somewhere else.

Step 2. Match the tool to your skill level. I can’t tell you how often I watch someone buy the most expensive new fly rod on the market before they’ve even mastered basic casting. A fancy sounding investment strategy will not make you a good investor any more than a fancy fly rod will make you a good caster. Being successful in both disciplines comes down to practicing the fundamentals.

Step 3. Simplify. A good selection of investments should work together just like a good mix of fly fishing gear complements each other. If an investment or a piece of gear doesn’t improve your results over time, simplify your life and get rid of it.

Step 4. Watch your costs, diversify and be disciplined. Good planning helps with all three of the aforementioned.

We all make mistakes. Fortunately, there are ways to minimize your investment and fishing mistakes. Revisit the basics and don’t be a “page 29 guy.”

To revisit the fundamentals and help minimize your investment mistakes, I suggest reading Capital Ideas by Peter Bernstein. It’s a fantastic book about the history of the modern financial markets.

To revisit the fundamentals and help minimize your fishing mistakes, I suggest Trout Tactics by Joe Humphreys. It’s a tremendous resource for the fly fisherman.

Conclusion

Fly fishing, like investing, is about practice, patience and fundamentals. If you are an
Independence Advisors client and would like to read either or both books, just let me know and I will be happy to send you a copy.

About Chas Boinske

Charles P. Boinske, CFA, is a 30 year investment management veteran overseeing the strategic direction and portfolio management process for Independence Advisors, LLC. Have a question for Charles? CLICK HERE TO ASK CHARLES

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