Why I Chose St. Paul as the Patron Saint of Investors

I’ve chosen St. Paul because he embodies the behavior of the average investor.

In Romans Chapter 7, verse 15 he writes; “I do not understand my own actions. For I do not do what I want, but the very thing I hate”. And in verse 19; “For I do not do the good that I want, but the evil I do not want is what I do”; and lastly verse 24; “Wretched man that I am! Who will deliver me from this body of death?”

St. Paul perfectly summarizes the results of every study conducted on investor behavior published in the last 20 or so years. We buy at the highs and we panic out at the lows. We rotate through investment fads just like we change diets and exercise plans.

If we separate the investor from the investment, studies show the average plain Jane equity mutual fund has produced an average annual return of about 10.81% annually including dividends since 1980, while the average investor holding shares of that same plain Jane mutual fund, on average fund have earned 4.48% annually, including dividends. People who manage their own assets in general, earn ~6.33 % less than the market.

We saw it again recently, from the S&P 500 high on May 21, 2015 to the low on February 11th, 2016. The market experienced a 14.2% decline which culminated in net withdrawals out of equity funds of almost $41 billion dollars and transferred to the "safety" of bond funds and gold funds.

What's hurting people making a good faith effort to invest?

The supernatural answer is "original sin", but studies over the last 15 to 20 years show the biggest contributor to retirement success or failure is behavior.

It’s like we’re drawn as a moth to a fire, and we say to ourselves, “what have I got to lose, I’ll probably get killed anyhow”. It happens when people are looking for the next hot investment and start chasing investment returns.

Switching in and out of mutual funds, buying bullion in an Individual Retirement Account or becoming a savvy real estate investor right near the top of the housing market are common mistakes. They’re looking for an easy way out. Investors want someone to tell them what to do.

In the whole scheme of things whichever low cost mutual fund you do or don’t own isn’t the key factor. That’s a short lived decision. Investment success comes from taking responsibility for calming your emotional behavior, when all around you are losing theirs.

What do you tell clients when the market starts going haywire?

An investor shouldn’t hire an investment advisor to pick the very best funds in the most perfect proportion. All things being equal, if studies regarding investment behavior are to be taken seriously, a good advisor or planner holds your hand and counsels you during the tough times; because the good times take care of themselves.

An investor, theoretically, should be able to double the annual investment performance compared to their neighbors, just by having a professional who prevents them from euthanizing their investment portfolio during an economic contraction.

I believe with every fiber of my body, that regardless of how much the market declines, that it will bounce back in a few short years and proceed to make a new glorious high. My job as investment adviser is to have enough faith in the future to keep my clients calm when the market, which permanently advances; despite the fact that it contracts cyclically. Those contractions as we all know are not easy to live through.

If St. Paul does everything wrong, why did you choose him as your Patron Saint?

The three main reasons I chose St. Paul is because he understands the weakness of our own humanity to properly direct our actions. St. Paul later writes in 1 Corinthians 13; “When I was a child, I spoke like a child, and when I became a man I gave up childish things", and "so faith, hope, love abide in these three, but the greatest of these is love."

Reason #1-FAITH: Having faithin the future. Looking back at the last 80 or more years, look at what mankind has achieved! Greater life expectancy, the finest health care money can buy, and computing power in the palm of your hand with the ability to instantly communicate with anyone, anywhere on the globe for no charge. Optimism is the only true reality.

Reason #2-HOPE: I don’t know exactly HOW things are going to turn out, I just know THAT things are going to be ok. We may not have the answer to today's problems, and perhaps they'll last longer than you expect, but just know things will eventually get back on track.

Reason #3-LOVE: St. Paul says in 1 Corinthians, 13: 4-7 “Love is patient, love is kind.Love does not delight in evil but rejoices with the truth.”

The truth about investing can be discovered by taking a historical look back to 1802. According to Jeremy Siegel in his book Stocks for the Long Run, stocks have returned 7% more annually after inflation than bonds. That permits a person to have a dignified retirement and have the needed funds necessary to donate to charitable causes by ignoring the temporary ups and downs of the market, and focus on accumulating a substantial position in low cost funds.