Articles, tips & resources from the team at BFA.
The Center for Disease Control & Prevention lists developmental milestones for the first five years of life – “skills such as taking a first step, smiling for the first time, and waving “bye bye.”” After five years, evidently, all bets are off, and it’s up to us to figure out the appropriate next steps. Now that we’re living longer, with yet more longevity on the horizon, what should the developmental goals be for our lives?
“Never go grocery shopping on an empty stomach” captures a recognized truth: there are better and worse moments in life to make decisions for our future selves. The trick is to seize the favorable moments to protect ourselves later during the more difficult ones. Precommitment strategies offer a powerful way to do this.
Given the jarring surprises of the past few years, it might seem risky to make any plans beyond next week. Why expose ourselves to more uncertainty and disappointment? However, thinking of our plans as blueprints and judging them by how close they adhere to the original design likely means they lack a critical ingredient.
“How many of you have dreamed of owning a sailboat?” a conference speaker asked the audience. Dozens of hands went up. “How many of you have dreamed of drydocking and painting that boat?” Hands fell back down. Few of us dream about the time, money, and vigilance required to prevent our possessions from falling apart, so we’re often surprised by what we’ve taken on.
The bargain that investors make with bonds is clear: in exchange for holding the most boring financial asset on the planet, they’ll receive slow, steady, but positive investment returns to cushion their far more exciting, but unreliable stocks. This year the agreement has been breached: bond prices have fallen alongside stocks as central banks raise interest rates to dampen inflation. How worried should investors be about this development and what, if anything, should they do about it?
The finale song of the 2015 musical Hamilton, based on the life of Alexander Hamilton, asks, “And when you're gone, who remembers your name? Who keeps your flame? Who tells your story?” Today, there are a number of new tools that we can use to tell the story ourselves and help our friends and loved ones do the same.
When we commit to accomplishing a goal, we commit to the possibility of at least two kinds of failure - the possibility that we won’t get what we want, and the possibility that, if we do, we may discover that success wasn’t worth the costs. These costs include not just the time, money and effort we expended to reach our destination, but also the things we gave up in order to get there. The poet Robert Frost famously alluded to these things as “the road not taken”; economists call them “opportunity costs.”
2021 marked the third year in a row of positive returns in most developed stock markets. For U.S. stocks, it was one of the best years on record and continued a remarkable run that few, if any, people expected after the 2008 financial meltdown. Stocks are volatile now, though, so people are asking, Is it still safe to invest?
