Dollar bills 370.
(photo credit: Steve Marcus / Reuters)
If history repeats itself, and the unexpected always happens, how incapable must
Man be of learning from experience.
– George Bernard Shaw
Boy, how the
times flies. While it seems like just yesterday that we were preparing for last
Yom Kippur, here we are again about to enter the most holy day of the Jewish
year. Once again we are preoccupied with seeking forgiveness for this past
year’s sins, as well as planning to improve ourselves in the upcoming year. Be a
better spouse, give more charity and visit the sick are just some of the goals
that we set for ourselves to become better individuals.
We focus our
self-improvement not just on what we can do better in the upcoming year, but
also by looking back and understanding where we fell short of our goals. In
today’s fast-paced, live-for-the-moment culture, taking time out to reflect on
the past and thoughtfully plan for the future may not be trendy, but it’s the
only way to truly improve.
Rabbi Abraham J. Twerski brings a great
example to illustrate this point: “Is it coincidence that our generation is
infatuated with digital watches and clocks? Old-fashioned timepieces told time
by a pointer, which had the past behind it and the future in front of it. These
timepieces symbolized an awareness of both, but a digital display focuses
exclusively on the present moment and gives no recognition to the existence of
either the past or the future. While we should not allow the burdens of the past
nor the anxieties of the future to exert a destructive effect on our living, the
constructive lessons of the past and a responsible attitude towards the future
can guide us to a proper and responsible life.”
As we tend to spend most
of our time preparing ourselves spiritually for Yom Kippur, now is a perfect
time to use many of these same principles to get our finances in order as
Don’t think that reviewing the past is for spiritual improvement
only. Taking the time to review your investment “sins” of the last year and
atone for them is a surefire way to get yourself back on the path to financial
Hot stocks? The culture of instant gratification is also
played out in the arena of investing. Turn on the TV, check your email inbox, or
even go to a synagogue kiddush, and you are likely to hear about “hot stocks”
that will make you rich in a very short time. Who needs to own a stock that
increased by 8 percent in value and pays a nice dividend when you can own the
next Google or Apple? What inevitably happens is that investors tend to quickly
buy a “hot tip” only to then sell it as soon as the next “tip” comes along that
they must buy.
In investing, the way to make money over the long run is
by sticking to a strategy. Isn’t it strange that with all the transparency to be
able to see exactly what top investors are buying and selling, and even read why
they are making the moves that they are, that investors who try and copy them
are unsuccessful? Two university research papers on the subject both came to the
same conclusion: Investors lack the discipline to exactly follow what the “top
investors” are doing. They start interjecting their own analysis into the
equation, don’t buy or sell all the same stocks and ultimately underperform the
No goals Investors need to look forward as well. You need to
define your goals. Whether you invest to fund your retirement, to pay for
children’s’ weddings, to leave an inheritance for the next generation, or a
combination of these, understand your goals and invest with those goals in mind.
Due to the emphasis placed on it by the financial media, investors often pay too
much attention to performance and too little attention to why they are
If you need your money in a year or two to pay for a wedding,
you may have to accept getting a small, guaranteed return on your investment as
opposed to “trying to beat the stock market.” Stock-market gyrations and returns
are almost irrelevant to an investment portfolio for which you only have a
short-term horizon and where principal protection is the ultimate goal. If you
understand your goals and you invest with an eye on meeting them, your chances
of success will be much greater.
May we merit a happy and healthy New
Year. Shana tova.
The information contained in this article reflects the
opinion of the author and not necessarily the opinion of Portfolio Resources
Group, Inc. or its affiliates.
Katsman is a licensed financial adviser in Israel and the United States who
helps people with US investment accounts. He is the author of the book
Retirement GPS: How to Navigate Your Way to A Secure Financial Future with