“People say they can take on the volatility, but it’s always the stories that people can’t take.” – Cameron Passmore
Government shutdown. AI slop. Autonomous driving fatalities. Geopolitical conflict. The end of the US as we know it. Amongst a barrage of negative headlines, which will make us falter? Napoleon once described a military genius as, “the man who can do the average thing when everyone else around him is losing his mind.” Apply relentlessly to investing.
“There is no investment idea so good that you can’t ruin it by raising the price higher and higher.” – Charlie Munger
Trees don’t grow to the sky. Markets work – for every buyer, a seller and for every seller, a buyer. “Diversification” has become probably the most overused word in investing…so much so that many professionals have forgotten how to actually measure and implement the concept.
“You cannot manage risk until you define your goals.” – Gerard O’Reilly
A principle so core to Root that it sits at the foundation of our Sequoia system.
A $100,000 investment may keep you up for weeks if it’s gone awry, but Warren Buffett probably wouldn’t take a meeting for less than $250 million. He’d chuckle and say “eh, not worth the hassle.”
A $20,000 family vacation may feel irresponsible to two small business owners who’ve spent their whole lives saving but now have $10 million in the bank. And for one of them, the trip will be the best he’s ever experienced, something his kids will cherish the rest of their lives. For the other, the opportunity cost of that $20,000 will not allow him to enjoy a single minute and be the worst money he’s spent in 30 years.
A thousand dollar hand may mean nothing to a professional poker player, but it’s the difference between three months of food or begging on the street for a family living in the projects.
If risk is anything that moves you further from, rather than closer to, your goals and your goals are hyper-personal, why do we use risk as some universal term? Words matter and precision matters, particularly when we’re discussing the plans for your financial future.
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Let’s get after it this week!
Brooks
Brooks Palmer, CFP® is Head of Investments at Root where he helps identify, evaluate, and implement investment solutions tailored to clients’ needs. In Full-Court Press, he breaks down what’s happening in the markets—cutting through the noise and jargon—while connecting it to Root’s core investment tenets so you can make the most of your money and your life!
Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The examples provided are hypothetical and for illustrative purposes only. The information presented should not be construed as investment advice or a recommendation to buy or sell any security.
Advisory services are offered through Root Financial Partners, LLC, an SEC registered investment adviser.