It’s been exactly thirty years since the story of an intellectually challenged man from Alabama took America by storm. Forrest Gump, with Tom Hanks playing the title role, was the top-grossing movie of 1994, taking in more than $678 million at the box office.1 The film was also a critical success, winning six Oscars, including Best Actor for Hanks.
Audiences loved Hanks’ earnest portrayal of Gump. Though not mentally gifted, he was always decent and honest, and would put 100% into whatever he was supposed to be doing—whether running the football for Alabama or rescuing his platoon mates in Vietnam. A major attraction of the story was seeing this essentially good person overcome obstacles with tenacity and optimism, and along the way being acknowledged by the cultural icons of his era.
Gump’s mother gave him a few pieces of simple advice, which he would often recall. One of these iconic proverbs was “Stupid is as stupid does.” Meaning that it doesn’t matter how intellectually brilliant you are if your actions are foolish.
This axiom is applicable to life in general—don’t try to get a selfie with a bison in Yellowstone Park—and also to investing. Often people with high IQs make imprudent investing decisions, possibly believing that they are intelligent enough to outsmart the broader market. For example, research by Bank of America finds that younger, wealthier investors are increasingly moving their money out of the traditional stock and bond markets and into alternative investments like real estate, cryptocurrency, and private equity.2 While some of these sectors have performed well recently, many new investors are chasing gains while concentrating their portfolio in just a few areas, increasing their exposure to risk.
Additionally, the study found that these affluent investors have also taken advantage of higher interest rates to keep much more of their portfolios in cash. While at first glance this may be seen as a safer place to keep money, it comes with its own hazards.
“Underinvesting is a risk,” says Callie Cox, chief market strategist at Ritholtz Wealth Management, “and it’s one that I think younger investors are susceptible to.”
Ironically, a broadly diverse portfolio which includes a broad array of domestic and international instruments may also include some exposure to these alternative investments.
This brings to mind the other famous quote from Forrest Gump, which is also a useful maxim for investing: “Mama always said life was like a box of chocolates. You never know what you’re gonna get.”
Since the future is unpredictable, you need to live with the expectation that sometimes things will go your way, but sometimes they won’t. You have no control over this. But like Gump you do have control over how you respond. It’s possible to meet each challenge with resilience and optimism.
And if you want to pursue a long-term strategy for enjoying the chocolates you like best, make sure you own the biggest possible box. Your trusted fiduciary retirement planner can help you with that process.
If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.
Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
11576 S State Street, Bldg. 1002
Draper, UT 84020
Sources:
1. http://go.pardot.com/e/91522/wiki-Forrest-Gump/9586ll/2376094811/h/bjbOlHdhY8RVEpor9k7zDMOqYxTS-wUCdgo7wfow0dc
2.http://go.pardot.com/e/91522/o-alternative-investments-html/9586lp/2376094811/h/bjbOlHdhY8RVEpor9k7zDMOqYxTS-wUCdgo7wfow0dc
Image: http://go.pardot.com/e/91522/movie-forrest-gump-816758-html/9586ls/2376094811/h/bjbOlHdhY8RVEpor9k7zDMOqYxTS-wUCdgo7wfow0dc
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