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Investment and Life Wisdom from Swedroe and Buffett

Whether you’re an investment novice or a seasoned veteran, it’s easy to forget: Investing is not about the money; it’s about how we employ it to enjoy a finer life. That’s the“why”behind all the financial wherefores, and why I am endorsing a newly published book by seasoned financial author Larry Swedroe: Think, Act, and Invest Like Warren Buffett.  I’ve enjoyed Swedroe’s previously published books, but I especially liked his most recent read because, well, it’s short. And to the point. He leads with what I feel investors today are critically in need of:

Think, Act and Invest Like Warren Buffet is designed to explain how adopting some basic principles can help you outperform the vast majority of investors and increase the chances of achieving your financial and life goals.”[1]

The rest of the book is dedicated to explaining how “outperformance” isn’t what most people have in mind when they think about investing. The word tends to generate visions of a nimble guru wheeling and dealing with one’s wealth. That’s not how it works … and the true gurus know that. Swedroe quotes Buffett: “By periodically investing in an index fund, the know-nothing investor can actually outperform most investment professionals.”

As Swedroe’s book describes, what does work is sticking to the basics, such as:

  • Investing according to your well-managed, individual plan (which implies you’ve got one!)
  •  Structuring your portfolio to dampen unnecessary risk and capture available returns
  • Controlling your emotions and avoiding unnecessary costs; remaining patiently on a long-term course toward your desired outcome.

If you are going to work with a financial advisor, he or she should help you (1) understand and apply these elegant principles, and (2) ignore pursuits that mostly threaten to lead you astray and add unnecessary expense. Swedroe’s book contains an excellent chapter on questions to consider along these lines when deciding whether to hire an advisor – or keep the one you’ve got. I particularly like how he addresses why, even if you are a confident investor, you may want to hire an advisor anyway:

“Even if you decide that you meet these requirements [to invest on your own], you may recognize that a good financial advisory firm can add value in many ways, including freeing you to focus your attention on the most important things in your life such as time spent with family, friends, or meaningful endeavors. Thus, you may place a greater value on that time than the cost spent on advice. It is a choice about finding the right balance in your life.”[2]

The book closes with a final chapter, “Winning the Game of Life.” I like the way it comes full circle on what I too strive to accomplish as an advisor. My goal is to free clients’ time spent managing their finances, so they can spend that time on their true interests. I also help them understand the fallacies of attempting to “play the market.” I want to help families play – and win – where it really counts: in their own lives.