Welcome to the May Edition of Top of Mind!
We heard it claimed that the most popular tattoo in America is one that says “No Regrets” ... but that 20% of people who get that tattoo later have it removed.
That’s the topic of this month’s Top of Mind: Regret, specifically when it comes to money.
This is no academic exercise! After thousands of client interactions over the decades, we have a good sense of the things that cause investors to say, “Woulda, Shoulda, Coulda!”
Before we get to that, there are some money moves people seem to NEVER regret:
1. Starting early to invest and plan
2. Being smart about taxes and investment expenses
3. Spending money on meaningful time with family and friends
4. Paying off high-interest debt
5. Completing an estate plan before they really need it (because eventually you will!).
These activities seem to fall into the same category as making it to the gym or choosing the healthy option on the menu: decisions you rarely hear people complain about after the fact.
Another category is mistakes investors sometimes make, but we wouldn’t necessarily call them “regrets.” That’s because investors can recover from these mistakes, and they often contain valuable lessons.
1. Trying to time the market. (Most people try it at least once and learn the hard way.)
2. Chasing a speculative investment. (Also often learned the hard way!)
3. Panicking in a down market. (Very understandable your first time through it.)
4. Falling in love with an investment...and watching it keep going down (hoping it will go back up!) and never selling.
5. Being too concentrated in a single holding. To be fair, great wealth can be created through concentrated positions, especially by business owners. But we’ve also very often seen the opposite.
Oscar Wilde said it best: “Experience is the name everyone gives to their mistakes.” We have “experience” too! After seeing enough investor mistakes over the years, and making some of our own, we aim to help folks avoid them in the future.
The last category is the true regrets experienced by investors. These are different from mistakes, which are often about investors getting carried away. Regrets arise from having the wrong priorities, or simple procrastination.
1. Waiting too long to invest. The money you invest in your 20s and 30s can grow powerfully over the decades.
2. Putting off planning. This is a big one as folks approach their golden years and realize how helpful some tax planning would have been. There’s no going back in time!
3. No estate planning. This is a sad reality that can affect loved ones and complicate grieving, yet it still happens more often than you’d think.
4. Not spending money while you’re able. This is huge, especially for newer retirees. If your financial plan says you can afford to spend, we strongly encourage folks to get out there and enjoy life. We save and save during our lives for “later” but at some point later becomes today!
5. Making life entirely about money. This may be the biggest regret of all. Money should be a tool to help you get the most out of life. Too often, it becomes the reverse: people make life only about obtaining money, and what really matters passes them by.
That’s a big part of our job: helping clients make meaning out of the numbers on an account statement, whether that’s caring for loved ones, planning a vacation, providing for heirs, charitable giving ... you name it! It’s not merely about building wealth as much as it is building a life you’re glad you’ve lived.
Believe us when we say: this is not a lecture! We’re constantly reminding ourselves of these same lessons. As Kurt likes to tell clients: We’re all in this together.
Thanks for reading this month’s Top of Mind! We’ll be in touch soon. In the meantime, if you have any questions, we’re just a call or email away.
Warm regards,
Kurt, Cassidy, Ken, Teresa, Brian, and Jacque
All investments carry risk, including loss of principal. Past performance is not a guarantee of future results. Baird does not offer tax advice.