Save more!

The most important key to reaching your financial goals: saving.

You can’t get good returns on money you don’t save and invest. 

You may not be able to control inflation, tax rates, bond or stock returns, but you have complete control over your savings.

This point was nicely made in a recent Wall Street Journal article, “If You’re Not Saving, You’re Losing Out.

The last 15 years have felt like a wasteland for portfolio growth if you just look at market appreciation. The Dow Jones Industrial Average, S&P 500 and NASDAQ indexes are up are 4-5% annualized over the last 15 years. That doesn’t look or feel like huge portfolio growth.

But, if you have been saving over the last 15 years, then your portfolio’s growth probably doesn’t look bad. In fact, your saving has probably caused more portfolio growth than investment appreciation or dividends. That’s not a bad thing, unless of course you haven’t been saving.

The easiest route to financial independence is through consistent saving. Getting great returns helps enhance the outcome, but the savings comes first, and contributes the most.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

Save more!

Athena Capital 1Q14 Client Letter

Athena Capital’s 1st quarter client letter is available.  

In it, I cover our investment results, my view of the market and economy, and how to set retirement milestones.

Let me know if you have any questions or comments on it!

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

Athena Capital 1Q14 Client Letter

Succeeding unconventionally

John Keynes once said, “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”  

What he meant is that people would do better if they were focused less on their reputation and more on what works, but they don’t.  

In investing, you cannot do better than average by doing what everyone else is doing.  This seems plain and simple, until investors become uncomfortable doing or being asked to do something the crowd isn’t.

Howard Marks, the chairman of Oaktree Capital, illustrates these points brilliantly in his latest letter to investors, Dare to Be Great II.

For those of you who don’t want to read the 9 page letter, I’ll summarize with quotes:

  • The real question is whether you dare to do the things that are necessary in order to be great.  Are you willing to be different, and are you willing to be wrong?  In order to have a chance at great results, you have to be open to being both.
  • …you can’t take the same actions as everyone else and expect to outperform.
  • By definition, non-consensus ideas that are popular, widely held or intuitively obvious are an oxymoron.
  • Most great investments begin in discomfort.
  • To succeed at any activity involving the pursuit of gain, we have to be able to withstand the possibility of loss.
  • But it’s crippling to have to avoid all failures, and insisting on doing so can’t be a winning strategy.  It may guarantee you against losses, but it’s likely to guarantee you against gains as well.
  • I’m convinced that everything that’s important in investing is counterintuitive, and everything that is obvious is wrong.
  • Unconventional behavior is the only road to superior investment results, but it isn’t for everyone.  In addition to superior skill, successful investing requires the ability to look wrong for a while and to survive some mistakes.

Great results will not come without discomfort, and not without risking looking wrong.  If you can’t stand discomfort or looking wrong–even temporarily–then you must be willing to save a lot more money (which means spend a lot less of what you make) to reach a successful retirement.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

Succeeding unconventionally

Investment advice isn’t only about maximizing returns

Generating above average returns isn’t the only way investment advisers help clients.

As Vanguard has recently pointed out, investors on their own tend to make bad mistakes that destroy returns over time.

Investment advisers can help their clients make better decisions in key areas that dramatically impact long run returns:

  • keeping clients on an even keel emotionally by guiding them to be fearful when others are greedy and greedy when others are fearful
  • guiding clients toward tax-efficient investing without making tax planning an all-consuming goal
  • keeping client investment costs low
  • guiding clients to rebalance their portfolios: selling what has gone up and buying what has gone down

According to Vanguard, such measures can improve an investor’s returns by as much as 3% a year.

I agree with Vanguard’s findings and believe it highlights what many investors may be missing: investment advisers help clients reach their goals not just through investment selection, but by providing prudent and effective advice that can significantly impact returns over time.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

Investment advice isn’t only about maximizing returns