I miss Prince. I remember when his song “I’m gonna party like it’s 1999” came out in 1983. I was just starting college and we played it at every party. The year 1999 seemed so far away, I couldn’t even imagine something so far in the future. Fast forward to the actual year 1999 and I worked in an office, overlooking Times Square. Pretty cool for a kid from Romeo. And it seemed like the stock market WAS partying all the time. The returns for the past five years had been 37%, 22%,33%,28%, and 20%. People started to say smart things like, “It’s different this time” and “Companies don’t have to ACTUALLY have earnings” to be profitable.
It was a frustrating time for me as an advisor because clients wanted to put all their money in high flying investments. I was met with derisive scoffs when I would suggest taking the growth from their portfolio off and moving to less risky investments. Somewhere in the middle of 1999 I began to doubt myself. Maybe people were right, maybe this time it was different. Six months later, we found out it wasn’t different-the bubble burst and a lot of people lost a lot of money quickly.
It feels a little like 1999 again. I am seeing people who want to just throw money into the stock market because they fear they will miss something. It can be very difficult to not get caught up in herd mentality. Stay strong my friends. Stay on course. The principles of financial planning will prevail at all times. 1. Keep a cash reserve for emergencies 2. Keep household debt under 30% of your income 3. Don’t buy more house than you need 4. Save 10-15% of your income. 5. Never let one holding in your portfolio be more than 5% of your investments. 6. Stay diversified at all times.
These seem simple and boring. Yawn. But it works. Don’t get into herd mentality when putting your financial life together. Stop envying others than may appear to have more than you. It just leads to unhappiness. The other day, I was working in my yard, and two boys were playing together nearby and talking about the stuff they had. Clearly one boy had many more electronic toys to which the other boy said “You sure have a lot of stuff” and the other boy sighed and replied, “Yea, but what I really want is a brother. I don’t have anyone to play with” I nearly started crying. A simple reminder that we need to focus on what is important, family and friends. So throw a party, and play Prince while you are at it.