One of my favorite boxers of all time is “Iron” Mike Tyson. Widely acclaimed for his ferocity and punching power, Iron Mike credits much of his success to his trainer Cus D’ Amato. Cus found Mike when he was a boy and guided him to success in becoming the youngest Heavyweight Champion. I’ve practiced martial arts for a long time, so I love to watch Mike’s fights but his interviews entertain me just as much. One of my favorite quotes from an Iron Mike interview is, “Everyone has a plan until they get punched in the mouth.”
This quote epitomizes so much in life. We all have plans to accomplish our goals, until something happens and it seems impossible to stick with that original plan. I don’t know anyone that hasn’t given up on a plan because of some catastrophe or obstacle. My coach recently told me that for a fighter, expecting to not get hit is absurd. This is because the other fighter has been training just as hard to hit you, so you should expect to get hit as it’s a natural part of fighting. It’s what you do after you get punched in the mouth that will decide whether you win or lose.
2022 punched investors in the mouth, but the fight isn’t over. Financial planning is similar to fighting in that we should all expect to get punched in the mouth occasionally. Historically, the stock market doesn’t always go up, so sometimes we take a hit. This is a natural part of investing and while not enjoyable, it should be expected. With a solid plan we can take the occasional hit and still accomplish our goals. Far too many investors give up on their plan because they let their emotions take over. More concerning is the fact that about 77% of pre-retirees have no plan (Fidelity, 2021).
This is one of the reasons having a trusted financial advisor can be crucial to your financial success. Much like Cus guided Tyson to his goal of becoming champion, an advisor guides you towards your goals by developing a plan and providing sound ongoing advice to keep you on track. The value an advisor can add to your outcome may exceed 3% in net returns versus an investor going it alone (Kinniry Jr., Jaconetti, DiJoseph, Walker, & Quinn, 2022). The next time you look at account balance and it feels like you have been punched in the mouth, remember the plan your advisor built and the fight isn’t over.
Fidelity. (2021). Behavioral Finance: Why investors make the decisions they do. Retrieved from Fidelity Institutional: https://institutional.fidelity.com/app/literature/view?itemCode=968173&renditionType=pdf&pos=A
Kinniry Jr., F. M., Jaconetti, C. M., DiJoseph, M. A., Walker, D. J., & Quinn, M. C. (2022, July). Putting A value on your value: Quantifying Vanguard Advisor's Alpha. Retrieved from Vanguard: https://advisors.vanguard.com/iwe/pdf/IARCQAA.pdf