Happy belated Father’s Day to all the Dad’s out there. This is an older post that I have edited, expanded, and added to.
My father is not an investor or “bank guy” by any means. But thinking back upon childhood and beyond, I realize that a good amount of the things that are important to investing, are the same simple life lessons my father tried to instil in me when I was young.
They are tidbits of wisdom that seem to have limitless application. Here’s a few that come to mind:
Use the right tool for the right job
Whenever my dad caught me trying to hammer something with the handle of a screwdriver, or unscrew something with a butter knife, he used to stop me and tell me to use the right tool for the right job. Taking the 30 seconds to grab a hammer was far better than breaking the screwdriver and being out the time and money that it would take to replace.
The same can be said about investing. We have a variety of products we can choose from, and several of them have their specific purpose. Use a TFSA if you want to save up for a car, not your RRSP. Use an RESP to save for your child’s education, not your un-registered account. There are benefits to using the right tool for the right job, and penalties for not.
knife for the peanut butter, spoon for the jam
I think this advice was brought to the both of us from either the Flintstones or Sesame Street, but my dad would repeat the jingle if we were going to make a peanut butter and jam sandwich. It’s a simple life lesson: be cleanly and organized.
If you are in the fortunate position to have “extra” cash to play with, or if you “have a hunch” that a stock is going to move, hey, more power to you. Take the plunge, if you see fit. But don’t get your ultra-risky speculations mixed up with your legitimate investments that should be the foundation of your savings.
Simply put, don’t take the money you are planning to use for a down-payment on a house and put it all in the latest IPO. If you can take a gamble, set up a separate account and keep only a small portion of your wealth there.
More importantly, it is linked to the “use the right tool” section above: It is important to keep certain accounts separate, even if you don’t invest in individual stocks. We need to remember time horizons when investing, and use the appropriate vehicle.
Do it right the first time
Nothing upset my father more than when he asked me to do something and I did it half-heartedly. Inevitably, he would make me re-do it. It taught me to put the effort into getting it right the first time.
This doesn’t always work with investing; we all make a bad decision from time to time. But if you can make the effort to make sound decisions, you won’t have to try to make up lost ground in the future.
Creating an investing plan for yourself, deciding an asset allocation, and following the plan is far more important that finding the next Microsoft. The fact of the matter is that most of us will never find the next Microsoft early enough, nor would we sell it when it should be sold. But following an asset allocation plan is something that we all can do… easily.
Keep your head up
This was a hockey lesson. I remember forgetting this advice once, and skating full speed into another kid behind the net. My tailbone hurt for a week.
If you are a do-it-yourself investor, then you will have to keep on top of things, especially if you are investing in individual stocks. Buy and hold is a legitimate strategy, and one that I tend to follow. But if you are not reading up on your companies, then you may be left holding some useless Enron stock, which may hurt more than your tailbone.
For indexers, it is important to keep marginally informed, and take care of re-balancing when your holdings get out of whack by a decided percentage, or at decided intervals.
Another day another dollar
More than advice, this is something he would say (still says to this day, in fact) when he got home from work and I would ask how his day went.
I’ve said in another post that I view my human capital as my most important asset, and it really stems from this saying. As long as you can keep working, you can keep earning, which means you can keep saving. It also means that you can spend when you need to, knowing that you have this powerful asset in your portfolio.
I prefer Steve Martin’s version, though: “All I’ve ever wanted was an honest week’s pay for an honest day’s work.”
Do as I say, not as I do
Probably the most frustrating to have to hear, but one of my favourites now, I would get this line thrown at me when I caught him in some sort of seemingly questionable situation where he told me one thing, but wasn’t following his own advice.
This is as important in investing as it is in life. There is a lot of good advice and wisdom out there from several people who know a lot more than you or me. It doesn’t mean that we need to do exactly what they are doing, especially when scale is an issue.
Warren Buffet is very good at recognizing value in stocks and whole companies. But he has said that the majority of investors would be better off by buying a basket of index funds.
Check your base
Living on a farm, ladders were constantly in use. Whether it be for changing light bulbs, painting barn doors, re-shingling the roof, cleaning the eaves or picking cherries, we were always up on them. No matter how many times I would climb the ladder, he used to always tell me to check the footing before climbing, and then again on the first rung or so.
A solid base to a portfolio should be able to avoid (or lessen) the impact of a hard fall from market heights. This helped me when the market was approaching 15,000 (I put the brakes on at about 14 and change in June of 2007). The ladder started to feel wobbly, so I stopped climbing, re-checked my base, stockpiled cash, and had a nice cushion to fall on.
If the ladder starts to feel unstable, check the base, or grab another ladder. High stock prices may offer a great time to move some money into bonds, for example.
Don’t waste Your Money
Kids always go through phases and fads. Often these fads cost money. Whether it is video games, rap music, Pokemon cards or BMX bikes, the truth is that most of these things will be forgotten 10 years out.
My father’s words (and disappointed eyes when I wasted my money on something foolish) have had a lasting impression. I don’t often buy shiny things, and save a very healthy portion of my income.
Put your things away
Whether it was my toys when I was little, tools on the farm, or the jars and packages after making a sandwich, my father always insisted that I put things away when I was finished with them.
Not exactly investing, this mentality has left me with a very organized system for recording income, expenses investments, dividends etc. Good accounting practices are very helpful come tax season.
I’m sure there are several more of these little gems that can be found. Feel free to add some in the comment section.