Get A Black Belt In Money

Martial arts teach valuable financial skills

That may not sound quite as you expect, but consider.

  1. Martial arts teach composure. There is little that will frighten an advanced black belt.
  2. Martial arts teach discipline. Nothing is free. You work to gain skill. Every week, forever.
  3. Martial arts teach process. There is a progression from knowing little to knowing much.  Skill does not happen all at once
  4. Martial arts teach humility. There is always someone better.

Those same skills add value to financial planning and investing.

The advantage of preparation

A martial arts master realistically expects to avoid trouble. That is their preference and they are good enough at recognizing it that it does not often become a problem. Being realistic though, they prepare for the times trouble cannot be avoided. It might be years before a situation arises. What happens then?

They execute a prepared response to an adverse situation. If someone attacks with a knife held low, the assailant will enjoy a different surprise than if they attack with it held high. Don’t point a gun at them unless you like wearing a cast. A head butt. How amusing that someone thought that would work.

The responses have been practiced hundreds of time, even with no expectation of ever using them. When the time comes they are fluid and effective.

Preparation in the stock market

Most people don’t walk down dark alleys with $100 bills hanging out of their pockets. If you can avoid all the problems of the world, you don’t need a black belt. Just like the stock market. You don’t need any skill if it always goes up. In fact the only valid definition of a financial genius is someone who participates in a rising market.

The market, however, does not always rise. In fact it predictably always falls part of the time.

You could check and discover that there is a 10% fallback about once every 11 months. There will be a 20% fallback about once in 45 months. 50% declines are not unknown.

Ask yourself a question. “What do I plan to do when the market falls?”

Not if, when. You should know the answer to that. Otherwise you will panic and fear is a poor counsellor. 

There are other questions.

  1. What can I do to avoid problems? Be aware that there are opportunity costs too. Holding nothing but cash will keep the market from hurting you, but at the cost of income and growth. It does reduce taxes though.
  2. How do I prepare before the problem presents? If you watch quality managers, their cash holdings tend to rise as the market rises. Things are not cheap enough to buy, so they buy nothing. Less skilled people invest more as the market rises.  They may look good this quarter, but……
  3. Should I prepare for all possible contingencies or just the probable ones? Again an opportunity cost question. Preparing for a 20% fall is quite reasonable.  50% is rare and you would give up a lot to defend it.

Relate to the martial arts skills.

Composure, discipline, process and humility. Build investments on those guidelines.

Knowing how you relate to time can make these easier to discover. Falling value you don’t need for 20 years is less stressful than value you need in six months.

Keep things in the perspective of your purpose.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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