Lessons from Investing

The reason I started investing was to help me learn to read balance sheets. I figured that if I had some skin in the game, I would be more vested in following the assets and liabilities of a company.

While I never did learn to be interested in balance sheets (I can follow them well enough; I apparently confused "understanding" and "find interesting" when I decided I needed to be more vested in them), I have learned something from the required disclosure that accompanies every investment document I've ever received, usually worded one of two ways: Past performance is not a guarantee of future return or Historical performance does not predict future returns.

The past doesn't define the future. As with investing, in life, there's a fundamental groundwork that can help define future possibilities, but there's no set path.

As companies are required to state it:

A variety of factors, many of which are beyond direct control, affect operations, performance, business strategy and results and could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements.

In short, the best laid plans can be undermined by a random factor. The important things in life are: 1) to have your fundamentals straight so you can figure out how to get back on course if you are derailed; and 2) to remember that your past doesn't fully define your future.

I had a wonderful heart-to-heart with a friend who had gone through similar professional experiences as me. Both of us acknowledged that our resumes probably shouldn't exist according to conventional wisdom. Both of us have had the misfortune of being laid off during tough economic times, and have successfully navigated the job market to find new opportunities.

We did not let our past determine our future. Instead, we looked at our fundamental beliefs about ourselves and where we wanted to be professionally and leveraged our experience and opportunity to get to those places.

One of the biggest tricks that I've used to keep in mind that past performance doesn't indicate future returns is to stop reading job market/unemployment "news" coverage. It's easy to get discouraged about my past based on the biased human interest stories about John or Jane Doe, who haven't been able to find a job for years or who have experienced discrimination for being "long-term unemployed." But, that takes my focus off of my fundamentals.

Instead, I look at the performance of people with similar fundamentals as me -- people who I know, who I can ask for advice. They are the people who, if the "news" is to be believed, are beating the odds. They keep me apprised of actual challenges, either in the area or the industry, so I can adjust my plans to accommodate those factors and achieve my future success.

Ah, perspective, the recurring theme of this blog!

Today, I'm grateful for clip-in hair extensions. After I lost my job, I spent $20 on clip-in hair of unnatural colors, which I consider one of the best purchases of my life. Even though, logically, I could have clipped in weird hair colors in my off-hours at any point during my career, it was a nice little bit of rebellion for me, about twenty years in the making. (I have always wanted to shave my head, but that has always conflicted with my desire to have mainstream employment. And, in spite of wanting to SHAVE my head, I never wanted to go patchy bald trying to bleach and dye my dark hair a cool unnatural color. Enter clip-ins -- all of the color, none of the conundrum!)