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Focus on your financial goals
Forget beating some index, focus on your financial goals instead.
When it comes to personal finance, what matters is not beating some index. What matters is meeting your goals. Those are not the same thing.
An index is just a broad measure of how a particular market has done. Think of it as the average.
The investment industry seems to think that their entire purpose in life is to convince you that the best thing you could ever do is hire someone to help you beat an index.
For the purpose of this email, I’d like to set aside the entire debate about whether that’s even possible and focus on why it doesn’t even matter.
Pretend you live in some magical fantasy world where all of your dreams (according to the investment industry) come true, and you actually beat an index every quarter for your whole life. Congratulations!
Let me just be clear about something: It’s still possible, even under that fantasy scenario, that you don’t meet any of your financial goals.
Because beating an index has nothing to do with meeting your financial goals!
So here’s my question: You landed in Shangri La, according to the financial industry. You beat the index. But you didn’t meet your goals. Are you happy?
The answer is… “No.”
Now let’s flip that scenario on its head. The worst thing in the world happens to you (again, according to the investment industry). You slightly underperform the index every quarter for your whole life. But because of careful financial planning, you meet every one of your financial goals. Let me repeat the question: Are you happy?
And the answer is obviously… “Yes.”
Stop worrying about beating indexes. Focus instead on meeting your goals.
Powered by: Carl Richards
Carl Richards: https://behaviorgap.com/