{"id":761963,"date":"2020-07-26T06:30:47","date_gmt":"2020-07-26T06:30:47","guid":{"rendered":"https:\/\/stockviz.biz\/index.php\/2020\/07\/26\/save-dont-invest\/"},"modified":"2021-09-14T08:44:54","modified_gmt":"2021-09-14T03:14:54","slug":"save-dont-invest","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2020\/07\/26\/save-dont-invest\/","title":{"rendered":"Save. Don't Invest."},"content":{"rendered":"\n

Focus on what is important in life.<\/h2>\n\n\n\n

Often, the highest selling product is the one with the best narrative, not the one that provides the best value for money. Similarly, what drives eye-balls in media are narratives around \u201calpha,\u201d \u201cout-performance,\u201d \u201cbest mutual funds,\u201d \u201c1% a day option strategies,\u201d etc. But what really matters to you are things like \u201cfund my kids\u2019 college education,\u201d \u201cretire at a reasonable age,\u201d \u201ctake a foreign vacation,\u201d etc.<\/p>\n\n\n\n

While it can be sexy to consider oneself as an investor <\/em>– fantasizing belonging to the same tribe as Warren Buffett or Peter Lynch – people looking to meet goals that actually make a difference to their lives, are better off considering themselves as savers<\/em>.<\/p>\n\n\n\n

One saves their income to meet expenses in the future. Thinking this way drives focus towards the two things that are entirely within one\u2019s control: savings rate and duration. <\/p>\n\n\n\n

Once you shift the internal narrative to saving <\/em>over investing<\/em>, how you measure success changes as well. The last thing you\u2019d want to do is play snakes-and-ladders with your portfolio. You\u2019ll want to reduce risk as you get closer to withdrawal. And finally, you\u2019ll realize that market\u2019s return doesn\u2019t matter as long as your funding needs are met.<\/p>\n\n\n\n

Accepting lower returns<\/h2>\n\n\n\n

While you are stuck in Silk-Board traffic the next time, ponder this:<\/p>\n\n\n\n

The current holder of the Outright World Land Speed Record is ThrustSSC driven by Andy Green, a twin turbofan jet-powered car which achieved 763.035 mph – 1227.985 km\/h – over one mile in October 1997.<\/p><\/blockquote>\n\n\n\n

How come you don\u2019t drive a jet-powered car? Wouldn\u2019t that be the \u201cbest\u201d car?<\/p>\n\n\n\n

The reason why you drive a mini-van and not a jet is because your life involves mundane things like grocery shopping, dropping your kids off to school, going to the mall, etc. <\/p>\n\n\n\n

Similarly, your portfolio should reflect your life. Just like you make-do with a mini-van (not the fastest, not the sexiest, but practical,) you should construct a portfolio that gets the job done. And that often involves not<\/strong><\/em> being the \u201cbest\u201d investor but focusing on risk.<\/p>\n\n\n\n

Managing risk means accepting that you will never go as fast as Andy Green.<\/p>\n\n\n\n

Market returns vs. Portfolio returns<\/h2>\n\n\n\n

A \u201clost-decade\u201d for stocks probably happens every decade.<\/p>\n\n\n\n

Here\u2019s MSCI indices for US, Developed Markets ex-US and India. The only thing that can be said for certain is that stocks fluctuate and occasionally tank 30-40% and sometimes even 70%<\/p>\n\n\n

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