My luck’s no greater than yours or any man’s. You need only sharpen your eyes to see your luck when it comes, and sharpen your wits to use what falls into your hand. Trust your luck, Taran Wanderer. But don’t forget to put out your nets! – Llonio, from Taran Wanderer, by Lloyd Alexander
Life’s a forge! Yes, and hammer and anvil, too! You’ll be roasted, smelted, and pounded, and you’ll scarce know what’s happening to you. But stand boldly to it! Metal’s worthless till it’s shaped and tempered! More labor than luck. Face the pounding, don’t fear the proving; and you’ll stand well against any hammer and anvil. – Hevydd, from Taran Wanderer, by Lloyd Alexander
One of the great joys of parenting has been to share some of my favorite books from childhood with my children. The Redwall series stands alone atop my list of all-time favorites, but close behind it is Lloyd Alexander’s The Chronicles of Prydain. For the past several months, my 7-year-old son and I have made our way through the series, following the adventures of Taran (the protagonist) as he grows from a boy into a man.
A few nights ago, we came across the first quote that I cited above, spoken by a resourceful and seemingly charmed character named Llonio who lives off the land. I paused after I read it and commented, “That’s good advice, isn’t it?”
“Yes,” my son replied. “And it’s true!”
“That’s the best kind of advice, isn’t it?
“Yeah. I think we should follow that advice!”
Indeed, I think we would all be wise to follow Llonio’s advice: to keep a sharp eye out for good luck when it befalls us, and sharp wits to make good use of it. For one thing, this attitude shapes us to be more grateful. Focusing on our good luck and blessings, rather than on our bad luck and misfortunes, keeps us in a more positive frame of mind and heightens our awareness of all that we have to be thankful for. For another, it encourages a spirit of creativity and ingenuity. When we have the good fortune to receive something valuable, or we’re presented with a great opportunity, it’s not enough to simply recognize it; we then have to make the most of what’s in front of us. This is where fortune, or providence, meets with human agency and creativity.
The second quote, spoken by a character named Hevydd, likens life to a blacksmith’s forge, in which we are all hammered by the trials and hardships of life. The key, according to the blacksmith, is to stand bravely in the face of adversity, embrace the hard work of our personal and professional pursuits, and remember that life’s inevitable trials will ultimately shape us and make us stronger.
These pieces of advice extend to all areas of life, but in the context of investing and financial planning, here are a few concrete applications:
- Stand boldly to the ups and downs of the market. The last two years have illustrated perfectly the unpredictability, and periodic volatility, of the stock market. In 2022, the S&P 500 was down ~20%. In 2023, it was up ~25%. Like Llonio, we should be mindful of our good fortune when the market is up. Of course, it’s also important to remember that only by “putting out our nets” and remaining invested can we be assured of experiencing that good fortune in the first place. And, when the market is down, as it was in 2022, we should heed Hevydd’s words and “stand boldly to it.” A long-term investment portfolio, like metal, is worthless till it’s shaped and tempered by years of patient compounding (which includes periodic market declines). As the late Charlie Munger once said, “If you can’t stomach 50% declines in your investment, you will get the mediocre returns you deserve.”
- Sharpen your eyes for planning opportunities. Any long-time reader of this blog knows that I prefer to focus on what I can control (financial planning) rather than what I can’t control (short-term market movements). Some financial planning strategies are directly tied to market movements, such as tax-loss harvesting, reallocating, or transferring assets to heirs (in down markets) or charity (in up markets). Some are tied to legislative changes, such as taking advantage of higher gift and estate tax exemptions, higher retirement plan contribution limits, or converting unused 529 funds to a Roth IRA. Others are simply related to life events, such as executing estate planning documents when you have a child, converting a pre-tax IRA to a Roth IRA when your taxable income is low, or enrolling in Social Security. Regardless of the catalyst, the key is to be on the alert for opportunities (“sharpen your eyes”) and take appropriate action (“use what falls into your hands”).
- Never stop sharpening your wits. One of the things that I appreciate about working at Baird is that I am constantly presented with learning opportunities (educational webinars, advanced designations, peer sharing, etc.) so that I can bring more value to my clients. This learning process can be laborious, but since markets, laws, and clients’ lives are ever in flux, maintaining a focus on “sharpening my wits” is critically important. Serving clients well and achieving positive outcomes is ultimately “more labor than luck.”
I loved these books as a young boy, but I’ve come to appreciate them even more as an adult. And to share that love and appreciation with my son – reading aloud while his head rests against my shoulder – well, I guess my luck is just about as great as any man’s.
And Now For Something Completely Different...
My grandmother, who taught piano for thirty years, passed away on her 91st birthday a couple of months ago. As a tribute to her love for the piano, I invite you to enjoy Valentina Lisitsa's performance of Franz Liszt's Hungarian Rhapsody No. 2. If you're short on time, the fireworks start at the 5:30 mark.
(Fun fact: I had the privilege of seeing Lisitsa perform Liszt as a freshman at Wake Forest. Somehow, I managed to snag a seat on the front row with a perfect view of the keyboard - seeing my luck as it came! To this day, that concert remains one of the most amazing artistic experiences of my life.)