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TCFP83: Easy to lose sight….

So far 2022 is turning out to be much more “exciting” than 2020 and 2021 when it comes to investment returns.

Investment volatility in both 2020 and 2021 was all upwards, because that’s positive it is often ignored as volatility.

2022 sees volatility in both directions – up and down, with the downs getting our nerves jangling despite them being the mathematical equivalent of the ups.

And therein lies the problem – jargon and concepts.

Once we go off down that road, we can feel detached from and uncertain about what is going on. I could throw about some “equities”, “stock markets”, “beta”, “reversion to mean”, “inverted yield curve” too if you wish, but I won’t.

I won’t because the more attached to your investments you are, the more comfortable you can feel, the better for you. Let’s try and make your investments as real as possible, using a car as an analogy.

Your investments are the engine and gearbox, fundamental – the car can not move without them.

However, an engine and gear box are useless on their own – they would make noise but go nowhere.

The engine and gear box need steering and wheels, brakes and a chassis (the car frame) to be useful.

For us, the steering and wheels are your financial plan – what direction do we want to head and why?

The brakes are your main safety feature – the safe, secure money we have earmarked or set aside to make sure you can do everything you want to for around the next three years or so, regardless of what your investments are doing.

The chassis holds everything together – this is TCFP, sturdy and keeping you on the road as we navigate the bends, hills and rougher terrain from time to time.

Back to the engine and gearbox. “Investments” is an opaque word – it means different things to different people. It is often misconstrued. Let’s not use it.

Instead let’s talk about how you are a business owner. That is the truth. You do not own “equities” in the “stock market”, you are a long-term owner of great companies around the world.

8,500 great companies or thereabouts. You are an owner of every company you can think of. You own their profits, their machinery, properties – everything that makes them a company, you own part of.

As a long-term owner, you buy all the human ingenuity innovation within them. All those incredibly bright, dedicated workers – people like you. If you believe in you, you can believe in them.

You are buying the resilience of these companies, their bouncebackability, their immense capacity for innovation and improvement. Sure, not all of them make it, but more than enough do, all the time.

Being an owner like this is the most effortless way for us ordinary people to accumulate wealth and an income we cannot outlive. That is all that matters.

When you become an owner of these companies is irrelevant. Long-term owners have always been richly rewarded with good returns bigger than inflation over time.

Back to resilience because it is the major feature of these companies. I will pick out one company that you own to demonstrate what I mean.

Marriott hotels were one of the hardest hit by Covid. Overnight they shuttered their hotels and furloughed their staff. Just before the Covid crash their shares were worth $147, six weeks later $59.

How financially sound must they have been to be worth anything at all in the middle of Covid with zero guests?

Today their shares are worth $182.

You are the owner of many thousands of similar stories. The spectacular resilience of these companies, through every adversity that can be thrown at them is a wonder to behold.

It is to be celebrated and embraced. This is not an abstract mathematical exercise; it is testament to brilliant companies’ continued ability to overcome whatever adversity is thrown at them.

For you and I, as ordinary people, being owners of these amazing companies remains the only rational option in an increasingly irrational world.

Never, ever lose sight of that.


Boring But Effective | Truthful, Helpful, Kind 

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