The last person to defend the America’s Cup was a businessman named Bill Koch. He decided he was going to try to win America’s Cup – and in fact did. He decided he was going to put up $60-$70 million of his own money to win the Cup. As hundreds of the best sailors in the U.S. heard this, they all raced over to Koch’s compound and said, “I want to race on your team.” So as Bill Koch began the interviewing process, the one thing he said upfront was, “Are you willing to make a commitment to win?” They all said “we’ll do anything,” of course… you name it!!
OK, here is what the schedule is going to be – for the next 18 months.
From 6:00 a.m. – 8:30 a.m. we’re going to do grueling physical conditioning.
From 9:00 a.m. – 12:00 a.m. we’ll be out on the water doing racing maneuvers.
You get 20 minutes for lunch.
From 12:30 p.m. to 5:00 p.m. we’ll do more practicing out on the water.
For the next two hours you’ll put the boat away, shower and eat dinner. Then we’ll have crew meetings until about 9:00 or 9:30 p.m. – 7 days a week, every month, for the next 18 months. Koch said we are gonna train so diligently for battle, that the actual war will be the easy part.
And guess what happened? The troops thinned out. In fact they rushed for the door!
Ask any weekend racer if he/she would like to crew and win the Americas Cup. It’s the dream of any sailboat racer. Then ask how many would be willing to rearrange their daily routine for 18 months so that their dream would become a reality – and you can expect less than a hundred percent response. It should come as no surprise to any of us who have ever tried to change anything or develop any skill, talent or ability. Beyond the decision to change comes the discipline part; the rearranging of our daily routine. Are you willing to do whatever it takes?
Achieving financial and investing success (with Healthcare or any investment) will probably require some rearranging of your routine. If you surveyed successful investors or those that are financially successful, you’ll find they have developed most, if not all of the disciplines listed below. The first three are obvious but I’ll include them anyway.
- Work hard—I’d like to think that most of us have this one under control. If you are unmotivated or unwilling to upgrade your job skills continually, you’ll put yourself at a disadvantage in the long run. Hard work and monetary rewards usually (but not always) go hand-in-hand.
- Establish a plan—Imagine trying to build a retirement fund over the next 20-30 years or longer without a plan. IRA and 401k plans are great ways to get started on a plan. 401k plans force one to save regularly. It’s a great tax saver and usually a company will match a certain percent of your contribution.
- Avoid Debt—It’s either the #1 or #2 destroyer of the best laid plans. I know several people with mid six-figure incomes that are getting nowhere because of crushing debt loads. Other than a reasonable mortgage or loans for education, avoid debt. On the flip-side, I know several people, who are completely debt-free—no mortgage, no car loan, no credit card debt. Imagine being able to bank most of your paycheck instead of paying creditors.
- Distinguish between wants and needs—When I was a kid, I told my parents that I needed hockey equipment. They said the only things I needed were: food, water, air, shelter and some clothes—which they would provide for the next 10-15 years. Everything else, David, falls under the “wants” category. As we mature into adults, we are still foggy on wants versus needs. The expensive toy award goes to the young couple in my neighborhood I encountered a few years back. They are young and have no kids. Both take the train to work. One day they bought a Ford Excursion. For the uninitiated, the Excursion is big enough to hold a Boeing 747 and a few hundred bags of groceries. Do people really “need” these things?
- Realize when enough is enough—We all want bigger and better things in life. There’s nothing wrong with that… up to a point. Ted Turner nailed this one when he gave away $1 billion, probably realizing he had enough. Americans sometimes become afflicted with affluence. A booming stock market is part of the cause.
- Walk away from get-rich-quick schemes—again, the result of a booming stock market and economy. In the past 15 years I’ve heard every scheme imaginable. It takes only one of these to destroy an entire nest-egg. From Viatical settlements, to Wireless franchise licenses to Penny stocks, I’ve found that most are duds.
- Stop trying to keep up with the Jones’ (or friends and colleagues)—If they want a bigger car, a more powerful snow blower and a built-in backyard pool—so be it. Don’t try to one-up them (this happens quite frequently). Easy solution: declare your neighbor the winner! That’s it! What does the neighborhood winner get anyway? Ok, he wins the Christmas light contest every year, but the cost is usually a lot of anxiety and a pile of burdensome debt.
- Get wise counsel—A few bad decisions can shipwreck an investment/financial plan. Ask a qualified expert, “What do you see that I don’t see?” Establish your own “personal board of directors.” The accountability and information could be priceless. When the “deal of a lifetime” comes your way, get counsel and remember discipline #6.
- Think long term—Learn about Coffee Can Investing. Learn about Warren Buffett. It minimizes taxes. It also minimizes transaction costs and commissions/fees. See our blog article on Coffee Can Investing.
- Emphasize high quality investments. The ISAW personal portfolio does have a few medium-grade and speculative-grade investments. But the vast majority of the portfolio is in companies that dominate their businesses like Medtronic and Johnson and Johnson. Investing in IPOs and speculative investments can be exciting and lead to outsized returns. But you will also have some that decline significantly or worse, some will go bankrupt.
- Be patient. Similar to Coffee Can bullet point #9. I have watched stocks drop 20% sometimes right after I purchase them. But I often find that when I demonstrate patience, they will come back and be profitable. The ISAW portfolio contains the Healthcare Sector ETF (XLV). After my initial purchase, it went immediately south. But I held on for more than a year… and it has more than doubled.