The Wisdom of Bob Swift
The 4th of July always provides me a time to reflect on our country’s history and those who came before us. Getting together with family and friends last weekend felt great considering where we were a year ago. This week I want to stick with the theme of reflection. From time to time, one of the things I enjoy doing at TCI is opening the boxes that are buried deep in the closets, looking to see what I can find from the early days. One treasure, which I won’t share until a few of our principals retire, is a video called, “An Ode to the Cold Call.” I can’t wait to expose it to the world one day, and not only because 7-year-old me makes an appearance. My acting career fizzled shortly thereafter, but the video holds up and it is hilarious.
A Brief History of TCI
What I can share, though, is an old newsletter I recently came across written by Bob Swift (no relation that I’m willing to admit). For those of you who don’t know, TCI was started in Tucson in 1990 by Bob Swift initially as a series of classes on investor education. You can read a bit more about the history here. TCI’s initial motto was “Confidence through Education,” which is something we still strive to provide. General investor education has come a long way since TCI’s beginning, yet there is still noise and confusion around investing which is why the information in the piece is still relevant.
As you read through “The Successful Investor’s Attitude,” originally published by Bob Swift in a TCI newsletter almost 30 years ago, reflect on how little good advice has changed over the decades. Of course, this is a profession that hardly existed (or was very difficult to find) in 1992!
Without further ado…
The Successful Investor’s Attitude
In my opinion, the most successful investors have two things in common. First, they have taken the time to get educated rather than trusting a third party to make their decisions for them. Second, they have developed an attitude and philosophy based on knowledge that guides them during any market situation. Their attitude can be summarized for your information.
1. Wall Street Has a Vested Interest in Confusing You
Consider all the information that comes from people who have a vested interest in what they recommend. It makes it very difficult to be totally objective. Wall Street knows the more confused you feel, the more likely you are to use them.
2. No Such Thing as an Expert
Many people spend all their time searching for some predictive guru to lead them through the investment maze only to be disappointed within a short period of time. They continue to spend all their time looking for this non-existent person when those same hours could be spent educating the person who cares most about their money…themselves.
3. Safety of Principal
The successful investor will spend more time avoiding loss of principal situations than looking for the highest returns. They know that the ultimate investment winners take lower short-term results to achieve predictable long-term returns.
4. Stay Unemotional
It is very important to recognize that nobody makes very good decisions when they are emotional. It is crucial to be aware that Wall Street knows the only way to get you to move your money around is to appeal to one of two emotions—fear and greed. Do not make decisions at these times. Back off, get the facts, and make a rational decision. Inaction is often the best decision.
5. Use Only Investments You Understand
The best portfolios I ever see have stocks, bonds, money markets and not much else. They have been kept simple, low-cost, and liquid.
6. All Media Information is Short-Term in Scope
If you are interested in long-term consistent results, you will ignore the papers, magazines and newsletters. Their information has to be exciting and generate immediate interest. Therefore, it has no bearing on a long-term plan.
7. Personal Accountability
Without exception, every successful investor blames no one but themselves for mistakes. Simply by being accountable, people will make much better choices for themselves. I am convinced that people pay ridiculously high commissions just so they will have someone to blame when problems come up.
8. Eliminate and/or Minimize Costs
One of the greatest detriments to successful investing is the cost. Be aware that virtually all investments are available with little, if any, cost. With any attention at all, you can save yourself 2-4% per year.
9. If It Sounds Too Good To Be True, It Probably Is
Trust your own instincts on all decisions. It never hurts anyone as much as you when something goes wrong.
10. Understanding of Diversification
Proper diversification will keep even the most nervous people unemotional. Choosing to use mutual funds is a great first step for anyone interested in diversification.
11. Striving to Be Average
While this may sound anti-American, it is a helpful attitude to have in investing. What it means is accepting what the market gives you, rather than always trying to find the “best” funds or investments. Always looking for these “top” investments creates a constantly changing portfolio that rarely goes anywhere after all the costs and hype.
Establish a plan with historically strong investment choices and stick with them. Let the markets work for you instead of constantly trying to beat them!
Successful investing is an attitude and a process. Stick with this approach and your results will go up while your costs and stress go way down.
Looking back on the piece, the only thing I would add today is that there is a definite place for an objective advisor to act as fiduciary and help educate, guide, and manage decision making with these principles in mind. Since this piece was originally written thousands of technological advancements in personal finance have been made, but the main principles still ring true, and we’re still writing about them: diversification, the fallacy of trying to time the market and the noise surrounding financial headlines. At TCI we’re constantly evaluating our approach to investing. If, and when, we see enough evidence to adjust anything we will. Until then, my guess is that in 30 years one of my kids might be writing (texting?) to one of your kids regarding the investment truths their grandfather wrote about and mentioning something embarrassing they found about me buried deep within a TCI closet.