Submitted by Steve Selengut
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Golf and Investing: Optimism, Focus, and Education
You knew it the moment it left the club, that spark at contact when you catch it just right. You look up. It's just reaching the top of its climb--- and heading down right at the pin, a pin positioned left of center on the elevated green, much too close to the water.
This could be the one! Four mouths hang open, not a sound. Then whack, the ball strikes low on the stick and disappears; the pin wobbles; the ball is nowhere to be seen---
Moe and Curley are certain it dropped into the hole as they hurry their tee shots and rush to their cart. "My buddy Stan holed out like that at Disney a few years ago", you hear, as they search the cooler for four cold brewskis.
Larry isn't ready to slap you on the back yet. "With my luck", he says, "the ball would go dead left, down the hill and into the water". He calmly puts his tee shot on the green, far to the right of the pin--- about where you were really aiming. What are your expectations? What scenario fits your game today?
If it weren't for optimism, few of us would continue to be golfers. The perfectly struck ball can encounter a myriad of obstacles on its way to your target. Experienced golfers expect some adversity, even when they are playing well. For most of us, it only takes one or two good shots to keep us coming back.
High handicappers shout "golfshot"--- as one word, when they think one of those has occurred.
Similarly, if not for optimism, few investors would have the courage to take advantage of the hundreds of opportunities that are created every time the financial markets hit the wall and tumble down Canal Street into the Hudson.
Are you headed for an ace or a double bogey, a nice solid profit or another disappointment? The decisions we make at the highs and lows of our experience are the most significant, always. Were you selling or buying six months ago--- eighteen months ago?
Just as Moe and Curley are certain the ball is in the cup as they rush to the green, many independent financial pros were certain that the markets would rebound throughout what seemed like twenty rounds without a single par.
After months of hazards, tree roots, hardpan, lip outs, and high winds in their faces, investors are experiencing a string of "gimmie" birdies--- in the form of a robust rally. Once again, Investment Grade Value Stocks and income producing closed end funds are leading the way.
Were you selling or buying six months ago--- eighteen months ago?
Being optimistic is critical for long-term investment success. When things don't seem to be just right, ratcheting-up your focus on basic principles, fundamentals, and the cyclical realities of the playing field is the type of practice session that gets those security (and club) selections back on track.
Optimism needs to be controlled or it morphs into speculation--- and speculation breeds both losses and snowmen. Most investors miss the early hours of the new party because their gurus don't think it will be much fun. Eventually, market cycles repeat; with practice, so will your swing. Don't forget to leave the party before midnight, pumpkin.
Remaining focused on the QDI rules you've developed for your investment program, and the few swing thoughts that fine-tune your pre-shot routine, bridles the optimism and allows you to focus on the major hazards that could keep you from goal achievement.
In both golf and investing, too much thinking about too many inputs from too many experts is as bad for the game plan as simply doing the things that haven't worked over and over again.
The key to attaining and maintaining a satisfying skill level is to understand what it is that you should practice. You're not going to three-putt less often by complaining about it. Find someone who rarely three-putts and ask for help. Focus on how things work, and you'll formulate more accurate expectations.
It's easier and less expensive for golfers to practice than for investors and there's a whole lot less at stake, financially. But practice means more than loosening up on the range and stroking a few putts before moving on to the "breakfast ball" or "Mulligan" that often describes your opening tee shot.
Practice means addressing the problem areas of your last effort before the next one. You need to be confident that you have it right so you can focus on the new challenges of today's pin placements.
Investment practice sessions are different, and I've learned that investors are more stubborn, lazy, impatient, and fickle than golfers. Both crave shortcuts to success and gadgets that will instantly improve their performance. But few investors are able to bring their focused course management skills to the long-term financial playing field.
Golfers will spend thousands on instruction, gadgets, machines, clinics, magazines, lessons, drivers, and putters. Investors love the gimmicks, shortcuts, and expert recommendations, but they seem allergic to anything really educational. They see it as a sign of weakness.
Golfers should be better investors. Investors need to introduce themselves to some basic education.
Retirement Ready Income Programs
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|Please read this disclaimer:|
Steve Selengut is registered as an investment adviser representative. His assessments and opinions are purely his own. None of the information presented here should be construed as an endorsement of any business entity; the information is only intended to be educational and thought provoking.
Risk Management: Income, 401k, and IRA Programs
Take a tour of a professional investment managers' private SEP IRA program during ten years surrounding the financial crisis:
In developing the investment plan, personal financial goals, objectives, time frames, and future income requirements should all be considered. A first step would be to assure that small portfolios (under $50,000) are at least 50% income focused.
At the $100,000 level, between 30% and 40% income focused is fine, but above age 50, the income focus allocation needs to be no less than 40%... and it could increase in 10% increments every five years.
The "Income Bucket" of the Asset Allocation is itself a portfolio risk minimization tool, and when combined with an "Equity Bucket" that includes only Investment Grade Value Stocks, it becomes a very powerful risk regulator over the life of the portfolio.
Other Risk Minimizers include: "Working Capital Model" based Asset Allocation, fundamental quality based selection criteria, diversification and income production rules, and profit taking guidelines for all securities,
Dealing with changes in the Investment Environment productively involves a market/interest rate/economic cycle appreciation, as has evolved in the Market Cycle Investment Management (MCIM) methodology. Investors must formulate realistic expectations about investment securities--- by class and by type. This will help them deal more effectively with short term events, disruptions and dislocations.
Over the past twenty years, the market has transitioned into a "passive", more products than ever before, environment on the equity side... while income purpose investing has actually become much easier in the right vehicles. MCIM relies on income closed end funds to power our programs.
To illustrate just how powerful the combination of highest quality equities plus long term closed end funds has been during this time... we have provided an audio PowerPoint that illustrates the development of a Self Directed IRA portfolio from 2004 through 2014.
Throughout the years surrounding the "Financial Crisis", Annual income nearly tripled from $8,400 to $23,400 and Working Capital grew 80% $198,000 to $356,000.
Total income is 6.5% of capital and more than covers the RMD.
Managing income purpose securities requires price volatility understanding and disciplined income reinvestment protocals. "Total realized return" (emphasis on the realized) and compound earnings growth are the key elements. All forms of income secuities are liquid when dealt with in Closed End Funds.
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|Please read this disclaimer:|
Steve Selengut is registered as an investment advisor representative. His assessments and opinions are purely his own and do not represent the views of any other entity. None of his commentary is or should be considered either investment advice or a solicitation of business. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be or should be construed as an endorsement of any entity or organization. The reader should not assume that any strategies, or investments mentioned are any more than illustrations --- they are never recommendations, and others will most certainly disagree with the thoughts presented in the article.