Seinfeld, the classic comedy show, found humor in the mundane. The show’s unique perspective produced memorable story lines and spawned a vernacular that still endures.  Surprisingly, the show also offered a wealth of investment wisdom.

Master of Your Domain

Who can forget that episode? The show about the exercise of self-discipline never mentioned exactly over what they were exercising self-discipline, but it might be Seinfeld’s most important investment wisdom principle.

Research tells us that asset allocation is the most important determinant of portfolio performance.  Not exactly true.  In fact, the most important driver of portfolio returns is investor behavior. Emotions and biases impact our investment decision-making. The failure to control them leads to poor decisions that adversely impact returns.

So, the first rule is to be the “master of your domain.” Don’t let fear and greed, or inherent behavioral biases master you.

Shrinkage

George’s protestations about cold water’s physiological effects are based on proven science, though it didn’t save him embarrassment. George really didn’t lose anything; it was a temporary condition that would eventually correct itself.

The same is often true of investments. Market declines can be highly unsettling as we see our portfolio values shrink. However, historical experience has repeatedly shown that markets do recover and our portfolios will, too.

The best approach to dealing with portfolio shrinkage is to keep it yourself, go about your business and wait for normalcy to return.  Remember, the size of your portfolio doesn’t really matter until the time comes that you actually need to use it.

Yada, Yada, Yada

Upon being asked by Jerry for the details of her date the night before, Elaine described meeting for dinner, having the lobster bisque, and yada, yada, yada’d over the rest of the night. Having been told that she just skipped over the best part, Elaine responded “I mentioned the bisque.”

As investors, we often hear about the lobster bisque part of a story, but the bad parts are skipped right over. Whether it’s about some product’s new bell or whistle or a specific investment idea, the story is always about what’s right and rarely about what might go wrong.

The “yada, yada, yada” of investments is important stuff.  The information that is left out is usually much more critical. Be sure to uncover the “yada, yada, yada” before investing.

Serenity Now!

Frank Costanza’s mantra, “Serenity Now!” didn’t quite work, but it was funny.

Investments can cause anxiety, even sleep loss. If they do, they’re probably not appropriate investments. Portfolios can be built to simultaneously achieve financial goals and obtain a good night’s sleep.

And, if anxiety remains about not reaching the “number” quickly enough, we’ll look to Seneca, the Roman philosopher, who observed “The greatest wealth is a poverty of desires.”

See referenced disclosures at  https://blog-dev.americanportfolios.com/disclosures/.