The big WHY.
I know I go on about this a lot (see here, here and here) but honestly, it's one of the most important things you can do in life - find out what you value, what you care about, what makes you happy, and optimise your money for that. In his excellent blog post, Nick Maggiulli calls it backward induction - solving for a problem in reverse. Without knowing what you value in life, you risk optimising for money itself. And that is a slippery slope to miserable-ness. As Nick writes, 'too much money might seem like a good problem to have, but getting to that point is almost never costless. People tend to overlook this fact at their own expense.'
It's about always having the end in mind, because investing is a means to the end and not the end itself. Investing is the thing that gets us where we want to go. Makes sense, right? If we don't take this approach, we end up fixated on our portfolio, and we end up fixated on performance. This leads to a horrible number of behavioural biases along the way, that most often have the effect of reducing performance. But that aside, I ask you this, do you think that anyone ever leaves this planet happy in the knowledge that they outperformed the S&P 500 every year for twenty years straight? Do you think that is what matters in our last days? Out-performance is not a financial goal or a financial plan, and it's certainly not a life plan. Out-performance will not even prevent you from running out of money (a good financial plan, and a good financial planneris most likely to be your best chance at ensuring your money lasts your lifetime and you leave a legacy to whoever and whatever is important to you).
How do you find out what you value? It's not easy (disclaimer: none of it is easy) - but it has to start with WHY? You have to continually ask yourself why. Why I am doing this? Why is this important to me? Why why why?
"Without asking yourself why you want to invest, you could end up living your life based on someone else’s values. You could end up chasing their dream instead of chasing your own. You could end up slaving away for 40 years, sacrificing your health, sacrificing your personal time, sacrificing your passions…for what?" - Nick Maggiulli
In his blog piece (which I HIGHLY recommend reading) Nick finishes with a quote from Steve Jobs (a man who knew a few things).
"Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become." - Steve Jobs.