21 Jun Eyes on the ball, please!
There’s a story of a man walking his dog in London. The man has done the same walk for years, starting at Primrose Hill, strolling across Regent’s Park and ending at the Boating Lake. The dog has boundless energy and never walks in a straight line. He leaps randomly from one direction to the next, stops to smell every leaf, barks at other dogs, and jumps on you for no reason.
At any moment, there is no predicting what the dog will do or which way he’ll leap. His movements are totally unpredictable. But you know he’s walking about three miles per hour, toward the boating lake, where he’ll eventually end up – because that’s where the owner is taking him!
This story is a perfect metaphor for how many people react to their investments. At any one particular time, the markets are as unpredictable and jittery as the dog. Yet, with the owner in control, the ultimate destination is actually far more predictable. The astonishing thing is that, many investors seem to have their eyes fixated on the dog and pay very little attention to their destination.
In our work with clients, we encourage you to pay more attention to your destination (goals) and less to the dog (markets). It’s our view that those who judge their portfolio by its performance relative to some narrow benchmark are focusing on an issue that is largely irrelevant to their ultimate financial success.
The only benchmark that you should really care about is one that indicates whether or not you are on track to achieve your financial goals.