Investors with Babies Outperform Everybody Else
Sep 22nd, 2010 by Carlos
It’s true! Recent studies show that investors that have babies outperform baby-less investors by a whopping 72%!
Just kidding!
If it were that easy to become a better investor then CNBC would actually be worth watching and the Octomom would put Warren Buffett to shame.
So obviously, having a baby won’t automatically boost your portfolio, but here are some lessons that parenthood can teach us all that can make us savvier investors:
• Think Long Term: Even though babies are a continuous time bomb (they get reset over and over and over again and keep blowing up over and over and over again), parents are always thinking long term. Will breastfeeding make them immune to every allergy and ailment under the sun? Will reading to my newborn mean she’ll get into Harvard? If I watch too much TV with her, will she wind up living in an alley behind the 7-11? Some of it is extreme, but investors should take this advice to heart: always think long term because the short-term stuff is for traders, not investors. We want to grow our money over time, not try to get rich in a month or two. Don’t confuse the two.
• You’re always in the market: When stocks plummeted last year and everyone panicked, lots of people took their money out of the stock market and said “Forget it, I’m done!” They thought that by getting out of the market they wouldn’t have to worry about what was going on with the economy and that their money would be “safe.” But, like parenthood, you are always on. When you take your money out, you are basically watching it rot on the sidelines until you put it into some other interest-bearing vehicle. Once you have money, you are in the market whether you like it or not. Same thing as having a baby—there is no down time. Even when you hand her off to a relative you know and trust, you still worry that said relative will trip and fall and crack baby’s head on the granite counter top. Call it paranoia if you like, but investors and parents are always on.
• Don’t get greedy: When baby dozes off, it’s tempting to want to put her in the crib and start laundry, the dishwasher, some dinner, and vacuum. All while you check the 13 voice mails you have. Oh and then you’ll email all those people back that you never got back to. Guess what? It’s not gonna happen. This is as foolish as chasing all those “35% annual return” programs you see on TV and online. Take what the market gives you and don’t expect any favors. Don’t try to push too hard because you will get burned/overwhelmed when things don’t go as planned (disclaimer: this is coming from a guy who once said greed is good).
• Things can get really messy really fast: The mortgage meltdown was kind of like having your baby decide to projectile poop right as you’re changing her diaper in a relative’s living room and starts screaming as loud as she can. And then it hits you: you forgot the bag with the diapers and wipes in the car… at home. Doesn’t sound very likely, does it? Well, that’s what they say about every recession. In order to minimize these catastrophic events (because you can’t eliminate them altogether), you’ll need to…
• Always be prepared: I can’t stress this enough. Maybe tech stocks will flourish, foreign stocks might surge, and small caps could take a nose dive. Just like a baby, you never know what might happen, so be prepared for everything by keeping your asset allocation up to date and making sure you’re diversified in case a major swing (in either direction) happens. And if you’re close to retirement, for God’s sake please don’t have 80% of you portfolio in stocks. It sounds simple and maybe too easy, but it’s the same with baby: between dirty diapers, hunger, and tiredness, that’ll solve 90% of the crying/fussiness issues that can come up. That’s why parents carry huge bags with diapers, wipes, formula, changing pads, and pacifiers…that covers everything they can control. If you stay ready, you won’t have to get ready.
• Sleep when the baby sleeps: This has nothing to do with the market but for all those readers that will eventually have a baby, remember it and just do it.
• Prepare for the worst: Just like parents always have more diapers/wipes/outfits/formula/toys than they could possibly need, investors should always try to have some cash on hand. When the recession hit and the stock market took a nose dive, having cash to buy depressed equities puts you in the driver’s seat. Why do parents carry all that “extra” stuff around? Because they’re prepared for the worst and because it gives you peace of mind (which cash also does).
Any other parents have some investing tips that they’ve learned from having a baby?
This post was included in the Carnival of Money Stories
Image by Andrew Mason
