On most mornings, I embark on a five-mile run with my dog Cricket. Cricket is a five-year-old yellow lab who loves running. Our morning ritual starts when I finish reading my daily dose of financial publications like the Wall Street Journal, Barron’s and Morningstar. When I remove my glasses, and shut my iPad case Cricket knows it’s time to hit the streets. With her leash in my hand she starts to get excessively excited and run around in circles. Once the front door is ajar she shoots into the yard like a bottle rocket. I let her run off leash for a while to burn off some excess energy.
A short while later we’re reunited and I attach her leash to settle into our run. Cricket knows where all the dogs live on our route and occasionally will try to veer off course and say hello. In addition to the neighborhood dogs, there are a multitude of distractions like squirrels, birds or cats. Cricket will give them a slight nod and then continue on her way. She’s never too concerned about what’s behind her and typically focuses on the road ahead.
When we arrive at the park I’ll let her off leash so she can cut loose. Back on the leash we head towards main drag and run with the flow of traffic. When we’re outbound Cricket will run slightly behind me and then when we turn for home she’ll lead the way. Once home, she is treated with a snack. After her snack, she’ll drink her water and then head for bed where she’ll sleep for the next eight hours. A good life for sure!
What can Miss. Cricket teach us about investing? Here are few ideas we can learn from my favorite running partner.
- Rituals are important. An automated investment plan mixed in with an annual rebalance will treat you well over the long term. Cricket’s morning ritual rarely changes and she’s a happy, healthy dog. For example, investing $10,000 into the Dimensional Core Equity I fund (DFEOX) ten years ago, and investing $100 per month is now worth over $42,000 generating an average annual return of 8.86%.
- Avoid distractions. Squirrels, birds and other dogs try to derail Cricket from her objective but she stays focused and runs on. Investors today are bombarded with distractions from tweets, posts, chats and snaps. The individual investor today is under attack 24/7. Give your distraction a quick look and then move on to your goal. If you let your distractions get the better of you, you’ll lose in the end. The Fidelity Magellan fund is a solid long-term performer. During the last ten years, the fund averaged an annual return of 5.29%. However, investors in this same fund averaged one-half percent (.57%)! Investors who were distracted by outside noise moved in and out of this fund. If they had stayed invested, they’d have improved their returns dramatically.
- Enjoy the treats. Cricket knows when she returns home she gets a dog-treat. As an investor, it’s suitable to take some money off the table and enjoy life. If you’ve accumulated a nice nest egg, crack it open and spend some money. Is it time to take your dream vacation? Have you always wanted to own a second home? Do you feel called to donate to your favorite charity? After all, you can’t take it with you when you pass away.
- Sleep tight. Cricket sleeps like a rock without a care in the world. If your investment portfolio is keeping you up at night and you can’t sleep, sell some stocks to reduce the risk in your portfolio. You need to reduce your risk exposure to your sleeping level.
It’s time to follow Cricket’s lead. To be a better investor focus on your investments, avoid the distractions and align your portfolio with your financial goals.
Happiness is a warm puppy. ~ Charles M. Schulz
God made the wild animals according to their kinds, the livestock according to their kinds, and all the creatures that move along the ground according to their kinds. And God saw that it was good. ~ Genesis 1:25
Bill Parrott is the President and CEO of Parrott Wealth Management, LLC. For more information on financial planning and investment management please visit www.parrottwealth.com.
Note: Past returns are not an indication of future performance. Your returns may be more or less than those posted in this blog.
February 27, 2017
 Morningstar Office Hypothetical Tool, DFA Core Equity I, January 1, 2007 to January 31, 2017.
 Morningstar Office Fidelity Magellan Mutual Fund report dated 1/31/2017.