Recently I was fortunate enough to hear Coach Lou Holtz speak at a conference. For those unfamiliar with Coach Holtz he coached the University of Notre Dame to a national championship in college football. He also coached other universities to very successful seasons prior to his time with Notre Dame.
I was so impressed with his talk that I began reading his book ‘Winning Every Day’. One of his ‘secrets’ to success is to follow the fundamentals. This seems to be a common theme among successful people in all walks of life. Fundamentals are essentially doing the little things right. Coach Holtz gave an example of breaking the huddle before the next play. When the team broke the huddle they yelled ‘Set..hit’ followed by a clap. If the players clapped in unison, he knew they were focused and synchronized. But If there a ripple of clapping, they knew the team needed more practice. Imagine that he practiced breaking the huddle. Now that’s what I call paying attention to the fundamentals.
One of the fundamentals of investing, in my opinion, involve following three simple rules:
- Own equities and short term high quality fixed income.
- Globally diversify.
These seem like very simple rules/fundamentals however most investors have a very difficult time following them. During the 2008-2009 meltdown investors sold their equities, many at the bottom of the first quarter 2009. How many of the three simple rules did these investors break? Did they follow the fundamentals to success? They in fact broke all three.
There will be other down turns in the equity markets. Are you prepared or able to follow the fundamentals of successful investing? Many people believe that the rules are simple to follow, however they only follow the fundamentals when the market is going up. As any coach understands whether it is football, basketball, baseball or any sport or any endeavor following the fundamentals consistently is essential to a successful outcome.
Your opponent is the Wall Street bullies. These bullies will continue to try to convince you to break all three of the three simple rules of investing. They will hype the hot sector in the media. When their predictions prove to be false they offer no apologies. They just move onto the next ‘product’. They will use fear during market downturns to sell safety. The bullies will continue to promote safety until the ‘bad’ times pass. Remember short term volatility is just that short term.
Also remember that when you are truly diversified there will be some component(s) of your portfolio that will be doing better than other component(s). This means that you will not be able to brag about the great successes of your portfolio. You also will not be required to explain to your spouse what went wrong. Getting rich quick is possible, however not very likely.
Even the most talented ‘players’ need proper coaching. The need for guidance and discipline is required for any consistent successful outcome. There is, of course no guarantee that past performance will assure future results. There are no guarantees in sports or investing.
To succeed in investing find an investor coach/fiduciary adviser who will keep you disciplined to the fundamentals. For the fundamentals are the basis of success.