Promotional Poster. Source: Wikipedia
Early in the hip-hop musical “Hamilton,” the title character sings, “I’m not throwing away my shot.” The catchy tune is mesmerizing, and it’s reprised several times throughout the play. It’s both iconic and ironic. At the end of the play – as in real life – Hamilton throws away his shot in his duel with Aaron Burr, and is then killed by Burr’s bullet. It reportedly took playwright/composer/lyricist/director Lee-Manuel Miranda over a year to write that song.
The song and story illustrate an important truth: we each get one chance to have an impact on those around us. We have one time-line to live through, one opportunity to prepare, produce, and protect our legacy.
We live in an uncertain world, with limited time and resources. It’s critical that we take this into account when we make our plans. The market’s long-term averages are important to understand, but averages can only take us a short way towards understanding how to invest our money. It may be true that stocks return more than bonds, on average. But that doesn’t mean we should put all our money into stocks. Imagine the consequences for folks who invested exclusively in US stocks in the ‘60s and ‘70s – during the go-go years – retiring after 25 years of saving and investing.
The stock market didn’t even keep up with inflation. Yes, stocks started to take off at the end of this period. But this was small comfort for folks who needed their savings to live on. It’s true that the accelerating inflation of the ‘70s was disastrous for investors, but this illustrates the point: we each get one shot.
We don’t live average lives, we live our lives. We don’t have average families, we have our families. We don’t have average jobs, we have our jobs. And we don’t invest in average markets, we invest in these markets, in these times.
That’s why it’s so important to have a personal investment plan that takes your individual circumstances into account: your income, expenses, assets, debts, goals, and limits. We’ve never had better or more personalized tools for understanding our finances. But they only help if we use them.
We only get one shot. Let’s be sure we don’t throw it away.
Douglas R. Tengdin, CFA