Sunday was Oscar night and in watching it my first thought was how the Oscars are nothing like investing. To begin, movies aren’t real -merely a depiction of reality that is designed first and foremost to entertain. The characters are fictional, even when based on real-life people. The story lines are drawn up by writers and the time line is unrealistically short with the world ending, or being saved in under two hours. Even the process by which awards handed out to the “winners” is shrouded in secrecy (who exactly are the voting delegates of the Academy?!) and more likely than not, the outcomes reflect some political agenda more than earned artistic merit.
Investing, by contrast, is real and reflects real-life developments such as an expanding or contracting economy, interest rates, consumer confidence and the dynamic nature of people all around the world. More, investing takes time -not hours, not days or even years, but decades. Investing is transparent and all information is known and incorporated into stock prices, allowing investors to vote -not in secrecy- but openly every day on the value of a given company based on its financial performance. Companies that are well-structured, well managed and that consistently growth their earnings over time are rewarded with rising share prices. There are no “Lifetime Achievement” awards in investing and companies that fail to innovate either are acquired by their competition or fail outright.
Hollywood is a product of course, with one over-riding objective: profit. So I suppose in this sense it is like investing, where this too is the ultimate goal. But otherwise Oscar night is pure fantasy, and an indulgent once at that. So I hope you were sitting back with a bag of popcorn last Sunday enjoying the show. Monday morning it was back to the real world of investing, where patience, discipline, focus and time contribute to helping clients build wealth over the long term. Having financial security in retirement is always better than any make-believe Hollywood ending.