“TEN GREAT ANALOGIES”
# 1 Inflation is like high blood pressure.
It must be controlled in order to prevent it from doing irreparable harm. You can’t feel it or see it, but, sooner or later, it’s going to get you unless you take the necessary precautions. To disregard inflation is to disregard the long term history of the world.
#2 Delaying the decision to start your investing plan is like delaying an important trip in your car.
If you have to drive to a town sixty miles away and you have to be there in one hour, you will be forced to drive sixty miles per hour for a solid hour. That’s scary. It’s cutting it too close. Yet if you delay your start time by only twenty minutes, you will be forced to drive the sixty miles at ninety miles an hour. That’s downright dangerous. Do you want to do that with your child’s educational funds or your own retirement? The time to invest is when you have the money. Quite frankly, you can’t start soon enough.
#3 What would you do if you stepped on an elevator and saw the only two button choices were “Soar” and “Plunge”, instead of “Up” and “Down?”
Obviously, you’d jump right back out the door, even though they are just words. The connotations are frightening. Keep that in mind when you are reading the newspaper, browsing the internet or watching the news on television. Words are just words and can be easily manipulated to stress a viewpoint.
#4 Imagine this. You wake up one morning feeling sick. You have a fever, you ache all over, and you generally feel terrible. You call your family doctor and you tell the receptionist that you feel sick and want to make an appointment. The receptionist says, “Oh, you don't need an appointment. The doctor will call in a prescription to the drugstore.” You reply that the doctor doesn't even know what the matter with you is. And the receptionist says, “That's okay. We only have one prescription for all of our patients.”
That's what an article in the newspaper is. It’s as pointless as one prescription for all patients.
#5 Not using a Financial Advisor is like hiking in a strange area without a guide.
Let's assume you are lost in the forest and nighttime is falling. You are two hours from nowhere, and those noises start. It's as dark as can be. Let me ask you a question. Would you rather have a compass and a map or a guide? I want to be YOUR guide.
#6 Mr. and Mrs. Client, can you take my advice even though you disagree with it. Let me explain. Being a Financial Advisor is like being a cliff diver in Acapulco.
Can you picture in your mind the guys that dive off those cliffs in Acapulco? Those divers are 125’ up on a cliff looking down at a body of water 21’ deep at its highest. As they look down, they see the water coming in and going out. To jump when the water is at its highest is a mistake because, by the time they get down there, the water will have receded and the diver will land on rocks. Rather, they must jump when they see the shallow water and rocks, so that by the time they get down there, the tide has brought in enough water to land safely. It takes a wily veteran to know exactly when to jump. I am that wily veteran. There will be times when I tell you to hold my hand and jump; and all you will see is shallow water and rocks. That shallow water and rocks are called a fiscal cliff, market bottoms, terrorism and the like. Will you be able to take my advice? Investing wisely is like cliff diving in Acapulco. It takes a true veteran to do it successfully.
#7 Mr. & Mrs. Client, you will often wonder if at certain times stocks are better than bonds. Or you will wonder if bonds are better than mutual funds. Well, that’s like wondering if a hammer is better than a saw? Is a saw better than a screwdriver? Is a screwdriver better than a belt sander or a pair of pliers? There are all different tools designed for different jobs. Each has strengths and each has weaknesses. Depending upon the job, you will get the best results if you use the proper tool. It’s the same in my business. It’s my job to create for you the best possible tool box.
#8 Suppose tomorrow you are in your car approaching a toll booth on a major highway. You are late and in a hurry. There are six lanes of traffic, all pulling up to the toll booths. The lanes are long. You are naturally frustrated. You want to pick the fastest lane. Some lanes are stopped and some are moving. But even the ones moving are moving slowly. Other drivers are thinking like you and several cars are jockeying for position. It’s a difficult choice, but you pick a lane, hoping it’s the right one. You’re in line and the lane next to you moves up. The guy in the Mercedes is moving faster than you. It’s tempting to change lanes, but you know what happens when your lane stalls and you change lanes. The lane you choose slows down and the lane you leave speeds up. What happens when you change lanes again? The same thing happens every time. You know that, so you get in a lane and stay there. You are not tempted by the lane to your left that appears to be moving faster than your lane. Your patience pays off. You get to the front, pay your toll and go on your way, and the guy in the Mercedes is still back there. His lane slowed down. You got through the toll booth in the most expedient manner because you know from experience that the lane you leave will always move the fastest. There will always be investments performing, for the time being, better than the investments you own. You will be tempted to abandon what you own and chase what’s hot. Don’t be tempted.
Chasing near term performance is a recipe for disaster.
#9. Owning a single asset class is like having a large picture window in your living room.
It’s beautiful, but if your break it, you have a problem; it’s expensive and inconvenient to replace. If instead you have a large window with many panes (i.e., a diversified portfolio), the light may not be as dramatic when the sun shines through it, but if you break a small pane, it’s a lot easier and cheaper to replace than a big one.
# 10. Money is like a bar of soap.
The more you handle it the smaller it gets.