NBA player Giannis Antetokounmpo recently had an exchange with a reporter that garnered a lot of attention. His team was knocked out of the playoffs and the reporter asked if he thought the season had been a failure. His response was brilliant and highlighted how achieving a goal is a process where you sometimes make progress and sometimes have setbacks.
He said, “There are no failures in sports”. He pointed out to the reporter that Michael Jordan played 15 seasons and won 6 championships and then asked if that meant the other 9 seasons were failures. He said, you can’t win all the time. Everything you do is a step towards your goal.
We set goals in planning and investing. Sometimes we are on track to meet them and sometimes we fall behind. There is a difference between a mistake or failure and an unfavourable outcome. Mistakes are avoidable. Unfavourable outcomes are not. Mistakes occur when you allow yourself to get distracted or you try to cut corners. Unfavourable outcomes sometimes occur despite your best efforts.
For example, if you followed a disciplined process to build and maintain an investment portfolio; if you were careful to align it with your risk tolerance, your investment strategy; if you were prudent about diversifying and rebalancing and still, some investments didn’t work out – that is not a mistake or a failure. It would have been a mistake if you ignored smart investing wisdom and for example, put too much money into one security and your thesis for choosing it didn’t work out.
Here’s the thing. Mistakes can be very costly. Unfavourable outcomes along the way to your goal are usually not. Mistakes can take you far off the path to your goal and maybe make it impossible to reach it. Unfavourable outcomes are part of the process of moving toward a goal.
I’m reminded of a study of highly effective people from all walks of life. It was a study that looked at high achievers in business, science, arts, academia and yes, sports. It aimed to discover what they had in common. It determined that the most prevalent and profound attribute they shared was this: resilience.
These people were not only capable of dealing with setbacks, they expected them. They would make a plan to achieve their goals but they knew ahead of time that something would go wrong along the way. They were ready for it and when it occurred, they would just say “I figured something wouldn’t go according to the plan, let’s deal with it.”
The rules of investing I speak of were created specifically because many things are out of our control. You can’t control how well the economy performs, how high inflation will be or what tax rates are set by the government. You also cannot control whether an individual stock will perform the way you expect. But if you follow a prudent process in choosing and managing your investments, the probability I wrote about a few weeks ago will bring you success.
Mistakes in personal finance are usually the result of a lack of discipline or of a poor or non-existent strategy. Avoid them and you may have some unfavourable outcomes from time to time. In fact, you’re almost certain to. But they will be minor in their impact or only take you off track from your goal for a short period of time. Be disciplined and stay with the strategy and you will achieve your goal.