Rock on Brother!

U2 produces powerful music.  I first heard U2’s song New Year’s Day in 1983 and was mesmerized with the band and their music.  I listened to their music on KROQ and KLOS while growing up in Los Angeles and eventually bought a few of their albums.  Several kids from my high school were music aficionados and listened to Rush, Van Halen, The Who, The Rolling Stones, Aerosmith, and The Eagles as often as they could.  When these bands toured through Southern California they would attend their concerts.

The classic bands have been playing music for a long time and their longevity should be appreciated.  Bands like U2, ZZ Top, Aerosmith and Rush have produced quality music for decades.  The Rolling Stones have been playing together since 1962!  These bands are also consistent and fans who attend their concerts will know what to expect.   In 1987, I attended a U2 concert in San Diego and my expectations were exceeded.

Rock bands can teach us a few lessons on how to become a better investor.

  • Quality. These bands produce quality music.  Their music has crossed generations and is still going strong today.   When you construct a portfolio of high quality investments it will sustain your account for generations.   Companies with strong balance sheets and solid earnings will deliver rock star returns for your portfolio.   In fact, profitable companies have outperformed less profitable companies 93% of the time over five years and 100% of the time over fifteen years.[1]
  • Consistent. The long-term survival of these bands can be credited to their consistent music and they weren’t one hit wonders like Dexys Midnight Runners or Haircut 100 nor did the succumb to popular fads like wearing hammer time pants.  The best bands focus on what they do best.   Steady, consistent returns will give you solid performance so don’t try to time the market or get caught up in the latest investment fad.  Pursue a buy and hold strategy by owning index funds with low fees.
  • Plan. Great bands just don’t happen without a plan.  Writing music, singing songs, and performing at concerts takes careful planning and lots of persistence.   A financial plan will make sure your goals and investments are working in concert to help you achieve financial success.
  • Patience. U2 was founded in 1976 but it wasn’t until 1983 before their band achieved global fame.  Their album War put U2 center stage in the music world.   Patience is also required as an investor.  It may take three to five years or more before your investments start to hum financially.    Set your eyes on the long term and don’t worry about short term fluctuations in your account balances.
  • Balanced. Classic bands use multiple instruments to deliver wonderful music and they don’t rely on one instrument or one performer to deliver results.  The balance in the band is what keeps fueling their run.  The intelligent investor will use multiple investments like stocks, bonds and cash to achieve positive results.   A balanced portfolio will help smooth out your returns over time as well.
  • Global. U2 was founded in Dublin, the Beatles in Liverpool, and Van Halen in Pasadena. If these bands only played in front of the home crowd, it’s doubtful they would’ve achieved global success.  To achieve global success in your portfolio you need to venture to distant lands by adding international investments to your account.  International investments will help diversify your account beyond local holdings.

As you construct your financial opus follow the lead of the great bands and focus on quality, persistence and longevity.   Rock on!

Music can change the world because it can change people. ~ Bono.

Let us come into his presence with thanksgiving; let us make a joyful noise to him with songs of praise! ~ Psalm 95:2

Bill Parrott is President and CEO of Parrott Wealth Management.   For more information on financial planning and investment management, please visit www.parrottwealth.com.

July 24, 2017
 

[1] Dimensional Fund Advisors, Historical Performance of Premiums over rolling periods, 1963 – 2016.

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