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Financial Lessons I Learned from the Dog

Get to know us Ted Halpern Carla LaFleur

Just this month our Communications & PR Coordinator, Carla LaFleur, brought home a furry bundle of joy—a Golden Retriever pup named Calvin. He’s an adorable little fluffball, and the whole team has been enjoying tales of his antics, from learning tricks to scaring the cats with his boisterous play. He’s especially funny to all of us in the office because there are so many puppy traits that correlate to good and bad investor behavior.

Good thing Ted’s dog Einstein has a few gray hairs on Calvin the rambunctious pup, and is here to teach him a few lessons.

Don’t chase after every new toy.

A puppy’s attention span is just a few minutes. Add distractions like toys, cats and interesting smells, and it’s not unusual to find Calvin parading around with his prized tennis ball one moment, then chasing his tail the next.

For investors, it can be tempting to be distracted from your long-term plan when the latest and greatest thing crosses your path. Perhaps it’s something major like a new car, but even small things can get you off track. Have you ever gone shopping for just one thing paper towels, and left with a basket full of things you never knew you needed until you entered the store?   Don’t be a distracted puppy--be a determined terrier digging holes, focused on your goal.

Learn to stay.

As we tell clients, it’s not timing the market that counts, it’s time in the market. Just as learning “stay” can prevent your dog from running into the road, learning to “stay” with your overall investment plan can keep you from locking in losses when markets panic, or from buying too high. It’s the difference between chasing cars and quietly waiting for traffic to pass, then continuing on your way. Vanguard’s research shows jumping in when markets rise and out when markets fall is a sure recipe to underperform.

Understand risks.

Calvin the pup still doesn’t know what’s really dangerous and what isn’t. For example, he has no fear of his 1000+ pound brother, Lefty the ex-racehorse, who could squash him flat with just one wrong step.

 Thankfully Lefty is gentle with dogs, but it would better if Calvin had at least some sense of self-preservation. However, for a week he was terrified of going down stairs!

Investors are often similarly confused about what is and isn’t a threat. A very common misunderstanding is when people confuse “diversification” with having multiple advisors or brokerage/bank locations. Not only does this add complexity and additional cost to your financial life, but it does not diversify risk. In fact, it can be counterproductive to have a disjointed mix of portfolio strategies that do not work well together, or overlapping investments that concentrate your risk in a certain area. Being invested in a wide variety of asset classes reduces the risk of any particular investment falling in value. By misunderstanding what diversification risk really is, investors may inadvertently introduce other risks!

 Einstein, on the other hand, knows exactly which threats he should and shouldn’t be worried about. Unlike many dogs, he prefers not to hang his head out the window when driving and instead prefers the safety of his comfortable heated seat!

 

Enjoy the good stuff, but don’t overdo it.

While Calvin’s vet was administering his first shots, he distracted him from the needle stick with what he calls “puppy crack”—a squirt of fluorescent orange Cheez-Wiz. I did feel some judgment in the checkout line when I bought Cheez-Wiz to use at home (I swear, it’s not for me, it’s for my dog!), but Calvin will do anything for a nip of the Wiz.

(I suspect he has a drinking problem as well.)

 As with anything enjoyable in life, if you overdo it, the value goes way down. Even something like going out to eat for lunch or a Starbucks drink loses the specialness if you do it every day, and can be an unnecessary drain on cash. Keep the good things in life as a special treat, and you’ll enjoy them all the more.

An old dog can learn new tricks, but it’s a lot harder.

This is why Calvin goes to puppy kindergarten and we do brief training sessions several times a day. Every moment an animal is with you, they are learning—whether it’s something you want them to learn or not. Enough consistent training early on, and the hope is for him to become a well-mannered dog after the dreaded teenage phase.

 Anyone who has ever needed to go on a diet or slim down their budget can attest to the fact that it’s a lot harder to lose weight or trim expenses after they have gotten out of hand than it is to simply keep them lean in the first place. It’s not impossible to change your path of course, but it is a lot easier to start with good habits than change them later on.

Enjoy each meal, regardless of cost or occasion. 

Every time you set down the kibble for most dogs, they react as if it’s a gourmet meal, and every day your dog greets you at the door, he is as joyful to greet you as if you had just returned from being lost at sea! Dogs live in the moment and that is something humans could really learn to practice. Rather than worrying about the past or the future, be present. When you enjoy a meal with the family, ask the kids to turn off their mobile phones and you do the same. 

 Of course, dogs don’t have future retirements or past debts to worry about, so you can’t live only in the present—but taking the moment to enjoy the people around you will give you the energy to accomplish your dreams and goals.

 

 

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