Shortcuts to Financial Success

Due to the NBA playoffs, I have been reflecting on what it takes to be a championship team. Each team has its superstars who provide a great show, and likewise each has its challenges that become more evident as the competition gets tougher. But I have learned from professional sports that in the end, the team that comes out on top will not necessarily be the one with the biggest star but the one that, as a team, is the most successful at executing the basics of the game. Winning coaches usually credit a return to the basics as their formula for success.

The same applies to investing. As the world changes and events seem to accelerate, I am often asked what hot new system of investing is most likely to lead to success? In answering this question, I return to what my clients have taught me over all these years. As I consider their individual success stories, a common pattern emerges. I can’t think of many in my client base to whom life granted shortcuts. There are no lottery winners in the bunch. A few purchased individual investments that did very well, but even without those they would still have been successful. I don’t have any who made a fortune in Bitcoin. The reality is, despite the dramatic cryptocurrency headlines, very few people bought Bitcoin when it was $10 and those who did likely took relatively small profits years ago.

I have clients who bought Apple stock in the single digits who actually still own it, but in each case those clients are successful even without it. They, like professional basketball players, know that the fast breaks and slam dunks are impressive, but championships are won by those who, as a team, practice, develop and skillfully execute the basics of the game. Most successful investors I know have lived pretty normal lives. They invested slowly but consistently, developing a well-planned offense while never losing focus on maintaining a strong defense, and even made plenty of mistakes along the way. But they understood primarily that trying to build a financial future around the hope of being given a shortcut, was a bad life model.

Too many investors today look for shortcuts. Many, especially younger investors think creating wealth comes from being lucky. The reality of investing, and the math that surrounds it, says otherwise.

Soon a new NBA champion team will emerge. Surely that team will have superstars, but it will also have injuries, missed shots and fumbled plays. Their ultimate victory will not be defined by any of those. When the champions are crowned, I am certain they will declare that it was their attention to the basics that carried them through. So it is with the vast majority of successful investors. I have learned from my own life and those of my clients the value of discipline and sticking to the basics, and the reality that those who try and take shortcuts will almost always be disappointed in the end.