Feed Your Focus. Starve Your Distractions

As investors there are thousands of things to distract us from our goals and the plans we create in an effort to accomplish them.  Daily living, marketing, and the widespread adoption of mobile devices and social media have made it increasingly difficult to remain focused.  Often, it is difficult to even know where to focus, much less maintain it over it time.  But I’ve come up with a little reminder that I like to review from time to time, and I want to share it with you.

When you distill down all of the possible areas you could focus your time and energy as an investor, you end up with four broad categories.  It looks like this:

In the bottom right box, are events that are simply unknowable and ultimately unimportant.  Frankly, few if any of us spend much mental energy here.

In the bottom left box are events that are important but that are ultimately unknowable.  Are markets peaking or is there still more room for growth?  What is the future of the economy?  What are interest rates going to do?  Are we going into World War III with North Korea?  All of these are valid and important questions that can have a bearing on the short term price movements of stock and bond prices.  But we have no way of knowing what will happen.

For example, in 2007 Federal Reserve Chairman Ben Bernake, said “… the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.”*  Shortly after his statement, Lehman Brothers declared bankruptcy in 2008, setting in motion a chain of events that rattled global markets and sent the S&P 500 stock index plummeting.  This is just one example, but analyst and forecasters have been wrong about the timing and movement of interest rates 64% of the time according to research from Davis Advisors.

The advance is permanent, the declines are temporary.  The world will not end.  It only appears that way sometimes.  This time is never different.  Stop being distracted by things that are seemingly important but ultimately unknowable and stay focused.

In the top right box, you have the noise.  These are the distractions that come at you from financial press, friends, prognosticators, newsletters, and social media posts to name a few.  Remember, at the end of the day, the media is not in the business of reporting the news, they are in the business of ad sales.  And, the worse the news they report, the more fear they create, the more viewers are hooked, the more ads they sell.  Life it too short to waste time and focused energy listening to the “pouting pundits of pessimism.”**

Finally, in the top left box, you have those things that are BOTH knowable AND important.  These are the areas of life that are worth every ounce of our focus.  These are the things YOU can control.

First you can control your investing behavior. Investment success is determined far more by investor behavior than investor intelligence.  You cannot control or predict markets, but you can control your spending and saving habits.  Focus on where you are spending your money and how much you are allocating towards your goals.  Be relentless.

Second, you can control who you surround yourself with, the professionals on your team that help you make smart decisions with your money.  You are the company you keep.  When you hire competent people to help you navigate the financial challenges that life brings, you greatly increase your odds of your success in the long run.  There is no substitute for a competent team of professionals.  They will help you maintain your focus, provide you with historical perspective, offer what their experience has taught them, filter out all of the “noise”, and provide you with a step by step course of action to reaching your goals, regardless of the current economic, market, or geopolitical climate. That’s something an algorithm won’t ever be able to provide.

Starve your distractions.  Feed your focus.  Focus on the things that only you can control, namely, your behavior (spending and saving disciplines), the professionals you surround yourself with, and the truths about market behavior (the advance is permanent, the declines are temporary).  Don’t allow the noise, the things that clamor for your attention and distract you from your long term goals to derail your plan.  By maintaining this focus, you give yourself the highest probability of reaching your goals.

Brannon Brown

Brannon is a financial advisor with LPL Financial and also serves as the team’s wealth manager. He joined Prosperion Financial Advisors in 2004. In addition to being a Certified Financial Planner® (CFP) and an Accredited Portfolio Management Advisor®, Brannon has a Master’s degree in Leadership from Denver Seminary. He is passionate about helping clients make wise, informed, investment and financial planning decisions. He is married to the love of his life, Melanie, and is the proud father of his son, William. When not working with clients or spending time with family, Brannon enjoys being in the outdoors of the Colorado high country, skiing, fly fishing, and exploring wild country.

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*https://www.federalreserve.gov/newsevents/testimony/bernanke20070328a.html **https://www.ftportfolios.com/Commentary/EconomicResearch/2013/5/6/the-qe-xcuse