Two Minute Drill - My Super Bowl Prediction

The winner of this year's Super Bowl will keep it simple. They will win the two-minute drill.

Similarly, we investors cannot practice the simple stuff too much.

The winner of this year's Super Bowl will keep it simple. They will win the two-minute drill.

Similarly, we investors cannot practice the simple stuff too much.

I recently saw a headline that read, "Why a strong dollar is a bad thing." I'm certain that I read, not long ago, that our dollar was going to be worthless--didn't you? It's hard to make this up. 

The point is that bad news sells. Bad news is almost all we see. If you're trolling for information, you're going to have to look hard for the good news.  

This is how it works: we get scared out of our investments. Other people buy them on sale and make a fortune. The most practical advice I can give is this: stop looking. 

Here is the second most practical advice: practice a two-minute drill. 

Follow these steps:

1. In what year were you born? Find it in this chart.

Fifty percent (50%) of our clients were born between 1947 and 1966. In 1947, the SP500 started the year at 15. In 1966, the SP 500 was 93. (1) Today the SP500 is at, or near, 2,275. But that's only half the returns--the other half is the dividend, compounding at more than 3% per year. All-in, stocks averaged around 10% per year. (2)

Inflation has averaged close to 4% during your lifetime. (3) It might not sound bad, but look at what that means. In 1966, $13.70 bought what $100 buys today. In 1947, your parents had the same purchasing power with $9. (3)

Every year, everything we buy gets more expensive.

2. Think about the difference between an increased cost of living and our income. Think about the role of dividends and the potential growth of our stocks during our retirement.

We are too easily distracted by the "Super Bowl" levels of noise around retirement. We look at the number of years ahead of us and say, something like, "There may be fewer years ahead of me than behind me." 

Here's a good news story, which isn't news at all, but it might tell more truth than most. 

Somewhere in the story, you'll find a good little bit of advice about failure, about change, and how they are both good. You'll read something about measuring net worth.  It's all stuff we know, of course. But we also know the facts about the long-term rates of return and yet we all still react to the headlines, don't we?

Here is the real question: can we practice too much?

Professional football players practice a two-minute drill relentlessly. Tom Brady is perhaps the best of all time at running a hurry-up offense, to help him win the game in the end. My prediction is that the Super Bowl will be won by the team that, when all the noise says "Change! React! Fear!" they stick to what they know.  

It’s not so different than investing after all.

Citations

  1. S&P 500 Dividend Yield by Year
  2. S&P 500 Historical Prices by Year
  3. Individual Year Conversion Factor Tables
 

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