McIlroy Money

Rivers of the Hidden (Financial Independence) Funk

Rory McIlroy (read about him here) gives me another reason to use this awesome, fun, introspective song.

Mr. McIlroy had one of the most amazing sports performances (if you watched it, and I know many of you did not - it was primarily for us golf junkies) of all time. You can read about it here (it’s five minutes or so).

Rory McIlroy won the Masters golf tournament Sunday, and he won it the way he was always going to, brilliantly and also raggedly, with more than a few moments of drama and dread.

He won his first green jacket in 17 tries by losing it, then winning it back, then losing it again, before winning it back once more. McIlroy’s collapses had collapses. His recoveries had recoveries.

There's a master plan, or so they say
I'm a patient man, s'il vous plait
And if what you earn and what you deserve
Isn't worth the price you pay
Save it for a rainy day
I'm a patient man

You might wonder sometimes, but we do have a master plan for your financial life, cashflow, and investments. It is all driven by what you want from your life. That’s what real financial advisors do. You’ll hear the above and also the following from us, often - “There’s a master plan.” “Patience.” “Repeatedly do the right things.” Patience might be the most important thing. We go through brilliance and the occasional raggedness more often than either of us might wish, because there is no perfection. We want to retract in times like these, when it looks like we had an easy (if you’re a decent, forget professional, golfer), 82 yard wedge shot and it ends up in the completely wrong place. We have to fight the feeling that it’s all lost, we cannot recover, or, maybe worse, we have to make an immediate, wholesale strategy change.

You may be thinking of your advisor, or yourself, in “bad” markets and wondering why you are losing the wealth-building tournament. Well, just like the conditions did not yield the result Rory was expecting, so does it happen in the markets. And the key thing is to stay in the game, hit the next shot, and keep going. Because the failure, essentially the only historical, true loss, is quitting.

And lo and behold, we end up winning. Just a few years ago, the 60/40 was dead. Read about it here. Dead, dead, dead. Two years later, it was very, very, very much alive. Read about THAT here. Why all the back and forth? Why, your brain, of course (mine, too, sadly. It’s why I write.) Just take a look at the performance of Morningstar’s 60/40 portfolio in 2022 (ours, too, and just about everyone else’s. If your 60/40 was looking good in 2022, I would call that lucky, not good, but awesome for you). The fact that your investments seriously outperformed the measure you are most exposed to, the S & P 500, means nothing when you see your account balances go down, and this is especially true if you are nearing that point in time when you need your investments to provide income. In markets where bonds and stocks go negative at the same time, and essentially the only safe haven is selected stocks and cash (the timing and selection of which are nearly impossible to get right), you are going to have a fear reaction. We all do.

The historically right action? Mourn for five minutes, then move on. Keep saving, keep investing, draw down your cash reserve if needed, and in a recovery fill that reserve back up. Go live the life you planned. Ignore the gyrations. Update your plan as your life, opportunities, family, income, desires, and just about everything else change.

Mr. McIlroy, remarkably, stayed in the game. He is a Masters Champion, and now one of only five golfers to win the career Grand Slam (all four men’s professional major tournaments). The other winners are all golf legends, as Rory will be. Just about everyone thought he was, after dunking that wedge on 13, stick a fork in him, cooked. You can read here about ten (!) others at the Masters who did not manage to stay in the game. This is not criticism. It’s more a reflection on how hard it is to remain consistent, to not do what others are doing, to have faith that while this time may be different, in outcome the most probable result is that it is not.

I do not and cannot know if your or my financial independence, this time, will be affected by a new and different trend and that the trend will behave opposite to what has historically occurred. I can only play the odds. I can be mindful of my own fear. I can be my best Viktor Frankl.

This is what sound planning is all about. To know what you need to achieve your goals. To have created a plan for contingencies, for unexpected occurrences. To rely on the plan, and not your emotions, as to the action(s) to take. To go back to the plan and ask yourself: “what are the potential outcomes, and given those outcomes should I act per the plan or do I need to do something else?” And if you choose something else, to model the likely outcomes of that. To make a conscious, intentional, informed decision. That’s planning. Good planning.

Will we be “right?” Only the future tells us that. The question we ask is: “Did we use a sound process?” We cannot control the outcome. We can control the process and inputs.

Want a smile and a tear or two? Watch this. Want to have the opportunity to feel like this? I cannot guarantee it - but in my soul I feel you have to stick with it right now.

And Kate Bush has a wonderful voice.

Sundry

• Current reading: Peter Wolf’s stories from his life, “Waiting on the Moon”. Fun, fascinating, and full of life lessons. Also, been digging deep into John Banville’s Quirke/Strafford series.