Good morning & happy Monday!
“Expectations always lead to frustrations. Expectations are the seeds, and frustration is the crop that sooner or later you will have to reap. It is your own doing.”
– Rajneesh Osho, Indian philosopher, 1931-1990
Please allow me to share a funny personal story with you that I hope will provide a helpful illustration for today’s topic.
A handful of years ago I was talking with my wife about planning a trip to Yellowstone, one of my favorite places in the world. In order to stay in the lodging inside the national park, reservations are often required a year or more in advance. It is a very popular place and it’s huge (the national park is the size of Connecticut) so understandably many people want to stay close to the main sights.
So, I was working on a trip to Yellowstone for the following summer and I mentioned to my wife that I would need to book our lodging now for a trip over a year away. She basically said, “That’s a whole year away, go ahead and book whatever you think would be best and we can talk about details as the date gets closer.”
Well, in my mind this is a complete greenlight to book whatever I wanted! So, I booked 3 different cabins throughout the park for our 7-day visit.
A few weeks before our trip my wife says something along the lines of, “I’m beginning to put together the packing list for our upcoming trip to Yellowstone. Do the hotels we are staying in provide breakfast or are we on our own for breakfast each morning?”
I start laughing and respond, “Honey, there is no breakfast served. I did not book hotels, I booked cabins … these are basically camping cabins, they don’t even have bathrooms, you must go to the community bathroom like you would at a campground.”
Let’s just say she did not think this was funny.
“You booked a week of cabins without bathrooms?!?! Who does that?!?!” was the basic response.
Needless to say, she was not really thrilled with my selection of lodging for that vacation. To this day whenever I bring up a trip idea she asks, “Does the hotel have a bathroom?”
Now, we had a wonderful time on the trip, but I had to dig myself out of the doghouse a bit on this one. 😉 She was especially uncomfortable when she had to go to the bathroom and there was a bear wandering around the campground … yeah, that did not go over well.
Every woman I have ever told this story to have sided with my wife on this one … apparently, I was way out of line to book a cabin without a bathroom. Who knew? 😉
Expectations. So many things ride on what we are expecting.
My wife was expecting that I would have enough common sense to book a hotel with a bathroom. Clearly that was a mistake, LOL.
Newlyweds often struggle with this as each partner has certain expectations going into the marriage. “Of course, you fix the car, that is your responsibility.” Such assumptions / expectations can create quite the conflict.
I once heard a quote that I have no idea who to credit: “The number one source of conflict is unmet expectations.” There is a lot of truth in that statement.
What are our expectations when it comes to investing?
Do we expect every year will be positive? Do we expect to get consistent double-digit returns? Do we have the expectation that the market only goes up if the political party we like is in power?
My guess is that when it comes to investing we don’t have clearly defined expectations. Instead, our expectations fluctuate, maybe even more than the stock market itself does. Our expectations can often times be more feelings-based than reality-based.
This is why investing is so stinking difficult!
Our expectations are shaped by many influences. The media, our social media feeds, our friends, co-workers, and family all help to shape what we expect. If at the Thanksgiving table your uncle says over and over again, “The market’s about to take a huge drop” and then gives his rational for this, this can affect our expectations for things going forward.
I would contend that when it comes to investing the best expectations to have are none. Now this may sound crazy, so please allow me to explain.
I have no idea (and nobody else does either by the way) what the stock market will do this week, the remainder of this year, next year or the next decade. Anybody who tells you differently is either a liar or sadly mistaken. As the saying in my industry goes, “There are only 2 kinds of people when it comes to the stock market … those who don’t know, and those who don’t know they don’t know.”
I know this does not sound like a very compelling pitch for investing. “So just throw my money into my investment portfolio with no expectations and just see what happens?”
I have had 3 jobs in my adult life, all in the financial services space. From 18-28 years old I was an employee at a bank, 100% employee. From ages 28-41 I worked with Northwestern Mutual, a hybrid between employee and self-employed (basically like a franchise). From age 41 to now I have been the 100% owner of Intentional Wealth. I can tell you from firsthand experience that owning a business is more stressful, but also more profitable than being an employee where I know exactly what my salary will be. I am trading the security of a salary for the opportunity to make far more as a business owner.
When we invest in stocks (equities) that is what we are doing. We are trading a guaranteed return in a product, like a CD for example, for an ownership stake in a business. Will that business ownership stake return me 5%, 10%, 15%, 20%? That I don’t know. But I do have a firm belief that the return long-term will far exceed what I could get in a CD.
It is my firm belief that owning a business is the best way to accumulate and maintain wealth. In my lifetime, going back to January 1980, the S&P 500 has an average annualized return with dividends reinvested of 11.57%. (Cool website where you can put in any timeframe to determine returns: S&P 500 Return Calculator, with Dividend Reinvestment (dqydj.com)) Is that a fair expectation for things going forward? I have no idea.
What I do know is that having an ownership stake in a diversified portfolio of profitable and growing businesses has the potential to produce a return far in excess of any other options available.
Why? Because of the uncertainly.
I believe this is a worthwhile trade off. Higher returns for less certainly. It’s most certainly not easy owning a business (I don’t know anyone who owns a business who says it’s easy), but the payoff is so worth it.
My #1 responsibility to my clients is helping them to stick to their plan during good times and bad times. Don’t get too excited during the good times, don’t get too bummed in the bad times. We are business owners here, buckle up, enjoy the ride, it is worth it!
If there is anything I can do to support you during this journey, please let me know. I am so grateful for the opportunity to partner with you!
Make it a great week ahead! 😊