Everyone has dreams: whether they want to admit it or not, everyone dreams of something. The question is, does the dream ever become reality? If it’s a dream that requires financial resources to materialize, then in fact to become real, it needs a plan. But a plan is only a roadmap. So, if you think that a plan alone is going to get you there, you’re still out of luck. The plan must be fueled by money, specifically money that’s appropriately invested in a properly concentrated investment portfolio. Nick Murray, a well-respected financial advisor, and prolific writer on the topic of behavioral finance, says, “the portfolio is merely the funding mechanism for the financial plan” (or something like that, I don’t know the exact words.) Finally, we’re getting somewhere.
But saving alone, just putting away money – that won’t cut it either. A lot of people save, though the savings won’t be sufficient to realize their dreams. They save, but they save in the wrong places. They don’t think about how long they will need the money, so they make poor choices. Or they let fear hold them back and they choose seemingly “safer” paths, like bonds, or cash, which prove to be anything but safe in the long term. Where the saving becomes “real,” meaning where your money turns into a funding mechanism is when you risk the savings. If you want to achieve your dreams (assuming they required some magnitude of what you’re currently able to set aside), then you can’t sit there waiting for them to happen. You must actively do something with your finances to get there.
The people who simply save without taking risk (I use the word “risk” in the sense of what is at stake in exchange for a potential reward), are the same people who think well, I can log into my bank account and look at my money every day. They may feel secure, though I would tell you that they are resting on a false sense of security. We run into this frequently. I was recently speaking with a young couple who had about $200,000 sitting in their savings account. Not for a down payment on a home. Not for some upcoming, short-term obligation or expense. Not for a wedding. They do have investments aside from this money. No, this money was not earmarked for anything. It wasn’t working for them, other than giving them this feeling of “oh, yeah, I know I’m good because I’ve got $200,000 sitting in the bank.” And what exactly were they waiting for? For inflation to silently erode their buying power?
This brings up memories from my childhood. It reminds me that at some point you’ve got to take your shoes out of the box and go get them dirty. I was a kid in the nineties, and sneakers were a big deal. When I got a brand-new pair of sneakers to wear to school, for the first few weeks, when I got home, I would put them back in the box. I would take particular care to replace them perfectly, maybe even put the tissue paper back inside each shoe. The first day that the new shoes got marked up with some dirt or something, it broke the spell of their newness. But you know, at some point you got to scuff them up a bit, right? You must get something out of those shoes, they were meant for walking, playing, jumping, or whatever.
My big brother, Eric and I were big into sports from the time we were kids. He was a New York Giants fan, and my team (at the time) was the Oakland Raiders. When our parents would get us each a football with the logo of our favorite team, Eric would put his under his bed and not use it, and we’d use mine until it was basically flat. I joke about this with him today and we laugh about this story. If we went to play outside, he would keep his football in pristine condition, and mine would get used hard. I bring this up not at my brother’s expense, but because a memory like this one points us back to how people operate psychologically around investing. It’s one thing to have it, it’s another to use it. At some point you’ve gotta take a chance, right? You take the shoes out of the box, scuff them up a little bit, and you know what, it might be raining that day. Who cares? The shoes will dry, or they’ll be a little dirty. Instead, you get to go out and have fun.
Our dad served in the military. He was a decorated helicopter pilot. And if you recall from watching the movie, Top Gun, Lieutenant Pete Mitchell, played by Tom Cruise had the call sign “Maverick.” That was on purpose because military pilots by and large have that type of personality. They take chances that others won’t. They face their fears, and they pull through. My dad has that quality, not arrogance but rather quiet confidence which he’s always demonstrated in the way he lives his life. He’s taught us a lot, and one of the things he used to say that rings in my head to this day is “dare to do something great.” Dare to do something great.
Life is constantly sending us reminders on this topic. Constantly. Every single day if we’re paying attention. A big wake-up call of this kind came to me in 2008. A good friend from college and former baseball teammate was on his way to play for the Boston Red Sox. He had battled cancer on and off since he was like 14 years old. Sadly, the cancer came back, and this time, for good. Going to his funeral and witnessing the pain that his parents and sister were experiencing, noticing my own grief, felt like a massive call to action. It said: “Nothing is guaranteed, don’t hesitate for one moment. Go out. Do things. Live!”
Whether you’re an advisor or a potential client, we are all investors, and we certainly are all human. Sometimes we need to be reminded that our dream will remain just that, a dream, unless we turn that dream into a plan. And the plan will need to be powered with something to become a reality. If it’s money, then you’ll have to make it work for you. Are you hesitant? Sure. Are you scared? Of course. But hear me on this: your dream is not going to become a reality sitting at Bank of America in a savings account.
My message to you is this: make your dreams a reality. Take your shoes out of the box.
Ben Beck is Managing Partner & Chief Investment Officer at Beck Bode, a deliberately different wealth management firm with a unique view on investing, business and life.