SAM INSTONE used to be an officer in the Household Cavalry and was once a housemate of James Blunt. Sam is happy to admit that he’s rather dull in comparison to his now famous fellow soldier. Blunt left the Army to become a multi-award-winning singer, selling more than 20 million albums worldwide. Sam Instone, meanwhile, has built an international financial planning business around being boring. And, as he explains, it’s a philosophy that has served his clients rather well.
I recently read an article about why boring is beautiful in investing. It caught my eye because being boring is something I can relate to.
I only need to think back to my Army days. Back in 2000, I was a young officer in the Household Cavalry. In our Officer’s House, lived the very talented James Hillier Blount (later James Blunt).
Whilst having similar jobs, we were otherwise quite opposite. Even before he became a world-famous musician, James was the life and soul of the party. He serenaded girls regularly. Was captain of the ski team. An awesome horseman. And an epic soldier who has some great war stories.
I, on the other hand, read books and played chess. Just three years later, he was one of the biggest-selling singers in the world. Safe to say, his life is pretty exciting. Mine, in contrast, is pretty dull. But I’m unapologetically happy about that.
Boring is better for investors
In fact, I’ve built a business around being boring. Based on decades of Nobel prize-winning research. Because quite frankly, boring is better for investors.
Just look at this year. Right now, ‘exciting’ portfolios are suffering more than most. It’s like investors are constantly faced with two plates. On one, chocolate cake and on the other, broccoli. Which do most people want?
Chances are, they want the cake. And this is normal. Even though their neocortex is telling them the broccoli will keep them alive longer and is better for their body, skin, and immune system, the irrational part of their brain has primal cravings.
They have control, but make a poor decision. They bite the cake.
This is how it plays out in investment terms, since January this year:
Source: FE fundinfo
Dimensional at the top, is broccoli.
Vanguard LifeStrategy, a handsome five percent below it, spinach.
At the bottom, you’ve got the remarkably popular Ark Innovation fund and below that Bitcoin, also known as chocolate cake with lashings of cream.
Indexing doesn’t make for great conversation
We live in a time of FOMO, with get-rich-quick ‘opportunities’ everywhere.
Successful investing should be boring. It should be long-term in nature. It requires patience and discipline and the ability to ignore the madness of the crowds.
But you can’t brag about boring to your friends and co-workers. At dinner parties, people naturally ask me about James Blunt (chocolate cake), not how to diligently save and invest their hard-earned money, keep fees to a minimum and stay the course (broccoli).
That’s not sexy. Sexy is meme stocks, crypto… and You’re Beautiful… Why wait decades to build wealth when you witnessed someone else do it seemingly overnight?
Of course, it’s easy for me to sit on my high horse, when we see the likes of FTX collapse. But this is one example in many.
My portfolio is pretty dull. The majority of my net worth resides in low-cost index funds and ETFs.
I won’t get rich overnight
But index funds don’t have an ego. They’re consistent, reliable and proven.
They won’t commit fraud against you, shut off withdrawals or transfer your money from one company to the next to cover losses made from stupid mistakes.
You’re never going to get caught up in a Ponzi Scheme investing in a total stock market index fund.
A high savings rate combined with a bunch of boring, low-cost, tax-efficient investments, helps me (and our clients) sleep at night.
Of course, the stock market is obviously not immune to large losses. But one of my biggest takeaways after nearly 20 years of working in the boring side of financial services, is survival is an underrated quality for success.
I’ve seen many portfolio managers, funds, fad investments and strategies blow up. And many financial plans decimated. Too many.
There’s something to be said for diligently following a strategy that is durable enough to survive many different kinds of market environments.
If I ever find myself comparing my life to James Blunt’s, I like to remind myself the boring stuff always comes back in style. When the boring stuff doesn’t work it usually means underperformance. When the exciting stuff doesn’t work, you can lose all of your money.
SAM INSTONE is CEO at AES International, an evidence-based financial planning firm with headquarters in Dubai.
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