An Integrated Advisor Network firm

Long Term

"Who do you think is the most financial secure person in the world?" It was a question I asked finance students when I was invited to speak at the local university. It was the mid-1980s and at that time one of the professors had me and other professionals talk to his graduating seniors about careers in finance. Most of the talks were about how to get rich with a finance degree. My talk was a little different.

As I remember, the two most popular answers to my question were Donald Trump and the Shah of Iran. But, as I pointed out to the students, "Those guys could lose everything and there would be no end to the line of people waiting to dance on their graves." I followed that by giving them my own suggestion - "Mother Teresa." After a pause I would continue, "Think about it. If she gets sick, there is a 747 waiting to take her to the best hospitals in the world. She can stay in the most expensive hotels and eat in the finest restaurants and no one would dare charge her. And she can't lose it. So it's strange, the person with the most financial security in the world is the one who gave up everything."

About the same time I was giving these talks, there was a television commercial showing a guy in a business suit scoring a long touchdown as his teammates knocked-down the opposition. During the ensuing end zone celebration, a voice-over proclaims, "You've done it! You've reached financial security!" To which I would reply to the TV, "That's a lie!" It's a lie, because financial security can never be achieved with certainty since we live in a world of uncertain probabilities, not certain guarantees.

To illustrate my point about uncertainty, I used to show prospective clients pictures of a smoker and a jogger and ask them which one would live longer. Everyone would say "the jogger" and I would answer, "Probably - but it isn't guaranteed." Just think about the running guru, Jim Fixx, who died at age 52 while George Burns smoked 10 to 15 cigars a day and lived to 100.

Recently, I read a New York Times article by Jeff Sommer about 83-year-old John Bogle who, after six heart attacks and a heart transplant, ought to know a little about uncertainty. Bogle believes that the unprecedented uncertainty in markets today is the result of "A culture of short-term speculation... superseding the culture of long-term investing that was dominant earlier in the post-World War II era." To better understand what Mr. Bogle was talking about, I read his book, The Clash of Cultures: Investment vs. Speculation. In the book, he laments that the financial services industry has "...become primarily a marketing business rather than a management business, a business in which salesmanship has come to overwhelm stewardship." In this shortsighted culture, he says, the interest of investors has been subordinated to "...the maximization of fee revenues..."

In contrast to this high-cost and shortsighted culture, Mr. Bogle preaches a gospel of low-cost investing with the long-term discipline to, in his words, "stay the course" in uncertain times. Such an approach cannot guarantee financial security because such guarantees only exist in that "better place" where Mother Teresa now resides. But, even though there are no guarantees, a long-term perspective greatly increases the chances of overcoming the curse of time and chance.

For Mother Teresa, "long-term" meant eternity, and that's how she lived her life. For Bogle, "long-term" means decades, and that's how he invests his money. For the rest of us, it would not be a bad idea to consider living more like Mother Teresa and investing more like John Bogle.