Long-Term Investing

I have this theory that the shows Friends and Sex and the City cover almost every topic that can possibly come up in life. Add How I Met Your Mother into the mix and all the holes are plugged. There is an answer for and an episode of TV that covers any situation we may encounter as adults. In working in the finance industry for the past eight-ish years, I’ve come to discover that finance can also be translated to real world scenarios. And perhaps best of all, we think we’re hilarious when coming up with these finance/life analogies. (I’ve yet to determine if anyone outside of finance finds these analogies amusing or useful).

Years ago, we came up with the theory that people can be categorized into the same asset buckets that we use for finance. I’m sure I’ve written about this phenomenon, and the corresponding explanation, in a previous blog so I won’t bore you with the details here. Suffice to say that it was unanimously determined that if I were an asset class, I’d be fixed income. After some additional discussion, I argued my way up to being deemed Core Plus (fixed income that is allowed to invest in up to 10% high yield, which is riskier fixed income). Long story short, I’m stable and not terribly exciting. No one in our office lines up to listen to the visiting bond manager speak. It’s not super sexy like hedge funds or emerging markets, but it’s something that most people feel is important enough to be included in their portfolios.

Years ago, I had some friends that were introducing me to another friend of theirs. Little did I know that apparently the most used adjective to describe me was “stable.” It wasn’t until I’d been hanging out with this person for a while that he said, “They were right, you really are stable!” I’m pretty sure he thought he was giving me a compliment. Boys, I have to tell you; stable should not be the lead off batter when giving compliments. It is not a homerun. Girls would prefer to be told they’re beautiful or cute or even funny, but stable implies boring.

He wasn’t wrong though, I am stable and consistent and even keeled. I don’t have huge mood swings and make very conscious decisions about all aspects of my life. So yes, all this adds up to stable. Although I’d argue that I keep the boring side to myself, my friends get the fun part of stable. The part that organized the majority of our fun outings.

It wasn’t until I stumbled upon a study that my company had completed recently that I realized how good being stable was. In our industry, clients want to invest with money managers who are the best. So we did a study to see over time, who was the best? It turns out, that while being ranked number one is sexy any given year, a manager who performed consistently in the middle of the pack is the better performer over a longer track record.

So applying that logic to real life, an investment in me isn’t going to make you rich instantly. Even my friends would tell you that I’m a long term investment since I warm up slowly. I’m not a flashy or sexy investment, but over the long term, I’m a pretty solid investment. Now I just have to find the right long-term investor.