Our American society celebrates, appreciates and rewards the bold and visibly successful.
President Trump rose from real estate developer’s son to reality television star to President, in no small part due to his outspoken personality and flamboyant lifestyle that flies in the face of the boring politician stereotype. Richard Branson, founder of Virgin Atlantic airlines, and Mark Cuban, investor and owner of the Dallas Mavericks, are frequently in the news because the media knows their exuberant personalities and visible wealth appeal to many people.
We don’t like settling for average, another word for boring in many people’s minds.
On May 15, the New York Times published an article, Hedge Fund Managers Don’t Always Beat the Market, but They Still Make Billions, marveling over the fact that the 25 best-paid hedge fund managers earned a collective $11 billion in 2016, even though over half of them made single-digit returns for their investors, while the boring S&P 500 stock index of large, U.S. stocks was up 12%.
For eight consecutive years, hedge funds have underperformed a roaring U.S. stock market, and many managers have lost billions on big bets that didn’t work out. But even with a fee system known as 2-and-20, a 2% charge on your investment portfolio and a 20% charge on any profit they make for you, people still flock to hedge funds and other high-cost investment options with the hope they will beat the market. In reality, more than 90 percent have underperformed their benchmarks over the past 15 years.
In politics, business and investing, boring seems to repel us. Not trying to beat the market seems almost un-American. Like you’ve decided not to work at it.
I was reminded how ingrained this is in so many people as I met with individuals referred to TAAG over the past few weeks. A friend, relative or advisor had recommended they meet with us, so they made an appointment and came in anxious to hear how TAAG was different.
When we reviewed our investment philosophy and how we’ve created and maintained long-term wealth for our clients for nearly 30 years, they seem disappointed. No ‘black box’ software model for stock selection? No market sector rotations? No exciting promises of out-performance?
Our system of building wealth for our clients, and providing a lifetime income when they’re ready, is not exciting. It’s an academic, well thought-out system of diversification, cost minimization, and rebalancing based on research, white papers and other disciplined processes we’ve developed over the years. It takes work.
It’s not exciting. It’s not easy to brag about it with your friends. You won’t see Chip, Danielle or me on television bragging about our track record, predicting what’s next, or professing to be gurus.
But like many things in life that take time and hard work, it quietly succeeds. And that’s when boring is a good thing.