Your Survival Guy

Preparing your investments and family for when disaster strikes.

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Be a Shepherd. You’ll Be Happier. Greed Kills

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I was talking with a client yesterday. He emailed me earlier in the afternoon. The subject line read “New Customer.”

His neighbor recently retired. She has a lot of company stock. She asked him what he’s doing with his money. She was intrigued by the “Armadillo” approach. I’ll let you know how our talk goes.

Until then, I want to share with you the rest of my conversation. I’m so impressed with my client. He’s built his business over many years of hard work by taking small steps. Being in technology, he’s benefitted significantly from COVID. But he was ready for it. He was preparing all of these years without really “planning” for “it.”

One key ingredient to his success is how well he treats his team. He always tells me how important his team is to him. He credits his team all the time. It’s refreshing to hear.

When I think about investing, I think about him. He’s an investor. He’s a shepherd. He’s guiding his team.

When I think about speculators, I think about the wolf. The guy that’s looking to pick off sheep here and there for a quick buck. That’s not investing.

Action Line: Be a shepherd. You’ll be happier. There’s plenty to go around for everyone. Greed is a killer.

Dick Young wrote of his Financial Armadillo Strategy:

In the heart of a bull market in March 1997, I was urging investors to ignore the “TV media financial gibberish, most of which is sensationalized to keep you twitching to the max.” I wanted to show readers how to insulate themselves from a bear market. To do so, I gave them my Financial Armadillo Strategy, an armor-plated long-term plan I use myself to this day. I wrote:

  1. Take a pledge of allegiance each day to your most trusted investor ally, compound interest. Learning how to better harness the awesome power of compound interest assures you of long-term success. It is interest on interest that allows you to invest like the world’s most successful capitalist, Warren Buffett.
  2. Commit to memory the first two rules of investing. Rule #1: Do not lose your capital. Rule #2: Do not forget Rule #1.
  3. Ruthlessly slash, hack and chop your investor costs. None of us knows the future for certain. Yet while you may not know the future, you sure as heck can know your costs today. Most mutual funds and annuities are high-cost breeders. Get rid of these leeches. You win every day by keeping your costs low.
  4. Armor-plate yourself against the taxman. Your best strategy is to hold trading to an absolute minimum. The mutual fund arena is fraught with trading excess. The average turnover rate is 80%, or more than 10 times what I target in my own account and advise for you. In every mutual fund’s annual and semiannual reports is a statistical display of portfolio turnover. Aim for 40% or less for your CORE funds. Don’t forget, each time a mutual fund manager sells a stock at a profit, you get a tax bill. These guys invest with no regard for your tax bill or your devotion to compound interest. You simply cannot pay enough attention to mutual fund portfolio turnover.
  5. Diversify, diversify, diversify. Proper diversification will help you sleep well during bear stock markets. We have not seen a bear market in years, and we are all, quite honestly, spoiled. Today is a dangerous time in the annals of the stock market and the least safe time in the last 16 years to be inadequately diversified. Sooner or later the music will stop, and you do not want to be the one left without a chair. You want to properly diversify yourself before it’s too late. You will never regret your diligence.

Times are never too good to ignore these basic tenets of investment philosophy. When you take off your investment armor, that’s when you become vulnerable to the swings of the market. If you aren’t already following this plan, start today.

Originally posted November 12, 2020.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com