The irony is that I am not practicing what I preach. I often tell clients that the less complicated an investment, often makes it better. This usually means lower fees, which translates into better performance.
It’s also true for the way people save. It can be very easy for someone to reach their financial goals by creating a plan, reviewing it at least annually or as their life changes, and simply letting the power of compound interest do the rest. Unfortunately, we live in a world where more complicated has become synonymous with more appealing. It’s easy to get seduced by the notion that more time and effort will always result in a better outcome.
All you have to do is look at our government to see how well this works. Most legislation that is passed is written on thousands of pages. Chip recently attended a Dimensional (DFA) conference where one of the speakers suggested each government agency cut their annual budget by x% each year. He mentioned this in his last blog post, FiscalStuff. This simple move could meaningfully cut our country’s deficit with minimal pain shared by everyone.
So, as you gather with your family over the holidays, and talk ultimately turns to New Year’s resolutions, maybe yours could be to embrace simplicity. This could be anything from setting up your 401(k) contributions to increase by 1% each year, to changing one dietary habit a month if you’re trying to lose weight, to just being cognizant of the way we allow complication to sneak into our lives. As with most things, once we create a plan of attack, our goals become easier to reach.
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