The Cleveland Browns have been consistently bad for the last sixteen years
They fired Bill Belichick, arguably one of the greatest coaches in history…
During these early summer months, I go through a minor case of withdrawals…from football that is. So hang in there with me as I illustrate the value of financial consistency in football terms…
The once storied franchise of the Cleveland Browns has been consistently bad for the last sixteen years. Over that time, they have had nine head coaches and twenty-four starting quarterbacks. Yes, the National Football League is a “what have you done for me lately” league paying big money to coaches and players and expecting immediate results. But keep in mind this is the franchise that fired Bill Belichick, arguably one of the greatest coaches in history in his role as the coach of the New England Patriots. The Patriots have won ten or more games (out of 16 in a season) for the last thirteen years. They have consistent systems for acquiring players, releasing players, and focusing on the fundamentals. Financial success is similarly attained.
Admittedly, we’ve all seen people acquire sudden wealth but success generally requires a commitment to principles that have always worked. “The plans of the diligent lead surely to advantage, but everyone who is hasty comes surely to poverty” (Proverbs 21:5). Take, for instance, recent performance in the investment markets. If gains in your retirement plan seem lackluster over the last couple years, you’re not alone. Include the past five years, however, and indexes that measure large company stocks and real estate related investments were up over 12% per year on average. Good, right? But, longer-term performance is only part of the point. The reality is that investors (maybe you?) recognized the high performance of these specific investment classes and piled in. But was that the right thing to do? Probably not, especially if you jumped in toward the end of the good performance.
Financial Planning, a journal for professionals, recently published an article written by Craig L. Israelsen entitled The Power of Portfolio Consistency. This outlined the perils of chasing the latest and greatest performer at the expense of a diversified portfolio. In other words, not putting “all your eggs in one basket” can pay off if given enough time. Since 1998 (through 2015), the average five-year return of those same large company stocks was 4.6%. However, a diversified portfolio (measured here by combining twelve different investment classes) earned 7.9% when averaging five-year returns.* And, it did this with 39% less risk!
The challenge is that consistency only pays off with time. Not unlike NFL owners, we want immediate results, but successful investing requires that we trust in the principles and the process. So, what does a good investor look like? Israelsen writes, “Clients who notice — and value — consistency of performance are generally emotionally neutral as it pertains to performance fluctuation. Stable investors tend to downplay periods of stellar performance as well as periods of underperformance. They have learned that, even though a portfolio’s performance will be cyclical, their emotional reaction doesn’t have to be.” In other words, have a solid plan and let the plan work.
Consistency is a theme throughout God’s Word. We are encouraged to save in good times so we don’t lack later (Proverbs 6:6). A steady approach in giving not only prioritizes our gift above the many other “needs” that can come up, but reminds us of reasons to be thankful and blesses us regularly (1 Corinthians 16:2). We are also called to repeatedly pass along wisdom to our children. In training our children to be wise with finances, it’s not enough to give them a last minute “hail Mary” lecture as they leave for college. Digesting a principle takes time. Note the focus on repetition in what’s known as the Shema (Deuteronomy 6:4–9) to the Jewish people:
“Hear, O Israel: The Lord our God, the Lord is one. Love the Lord your God with all your heart and with all your soul and with all your strength. These commandments that I give you today are to be on your hearts. Impress them on your children. Talk about them when you sit at home and when you walk along the road, when you lie down and when you get up. Tie them as symbols on your hands and bind them on your foreheads. Write them on the doorframes of your houses and on your gates.”
And, of course, our model is Jesus Christ himself for He is “the same yesterday and today and forever.” (Hebrews 13:8). Consistency profoundly matters in many aspects of our lives and finances are no different.
Go for the win by striving for consistency in financial disciplines…
Anthony Saffer
Principled Prosperity is focused on equipping those who choose to ignore the noise. The world of finances can be complex, but basic truths have persevered over time, across cultures, and in spite of changing circumstances. Anthony Saffer writes on his experiences in personally working with families to coordinate principled financial and investment solutions.
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