How to Invest for Outcomes

You can learn a lot about investing from cats.  Have you ever watched a cat stalk something? Cats have an incredible ability to focus. They see movement extremely well within their field of vision, and if something is in their sight, nothing else matters. What if you focused on your desired financial outcomes like a cat? What if you too could eliminate the irrelevant noise?

Most us are quite skilled at “scanning for errors.” Even in good markets, we can always find at least one part of a portfolio that distracts us from the whole. We wonder why one account performs differently from another? Does this really matter?

Like the cat, our sole focus here is on outcomes. If your portfolio is well-diversified, there will always be differences in performance among the various parts. Isn’t that what diversification is about? As a colleague likes to say, “diversification gives you something to always complain about.”

To invest “like a cat,” you first have to put a well-diversified portfolio into place. You can’t pretend. You can’t keep old favorite stocks or funds unless they truly fit with your desired outcome. Many investors become “stuck” when it comes to parting company with positions that have losses. To be blunt, the market doesn’t know what you paid for the stock, and it doesn’t care. Remember the one thing that keeps you investing for the future.

Once you have built a globally diversified portfolio, the really hard part begins. “Staying in your seat,” as Dimensional Co-Founder David Booth puts it, is difficult at times. This is where outcome-based planning can help. Because we aren’t wired the same way as cats, staying focused is difficult without ongoing guidance. That’s precisely what we do. Ready for a real conversation?

The picture above is our very own Victor. He’s a five-year-old gray/white tabby and the proud successor to our previous felines, George, Oscar, and Killer. If you are curious about cats, what we know about them and what we don’t, I highly recommend viewing The Lion in Your Living Room. This 2015 documentary traces the evolution of cats from Egypt forward and is quite entertaining.

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