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April Fools Day, or a life for fools

Join our founder, Steve Rowe, as he explores what it means to be foolish... Some, or all of this may be true and as it’s April Fool’s day, you must decide which!


Instead of doing some naff hoax for you to giggle at briefly, on Easter Monday when you are no doubt having a sugar crash, I thought we could review fools of all kinds and in all their magnificent wonder! Then, no doubt somewhat tenuously, I will link it in some way to investment management and potentially hide a message in there.



I am your fool in chief! Being serious is not my specialism. If I ever needed a job, I would not put on a CV, under the section ‘Key Skills’ that I was serious. Socrates, perhaps the greatest thinker of Ancient Greece, declared that “he knew nothing” and would make fools of those that thought they were wise, by pretending to be an ignorant fool. Walter Kaiser, in “The Wisdom of the Fool” notes characteristics of the fool, one of which being that they ‘babble incoherently’, which I am certainly prone to do and perhaps am doing rather well in this very paragraph! Let’s hope the ‘wisdom of the fool’ wins out in this newsletter and it gives you something of use.


When talking with our clients about their money, we are really talking about their life. I want these meetings to be a great, happy experience! So, I want to joke around. Whilst all the time knowing that it is very serious, because illness or death is coming for us and the people we love. We need to enjoy life while we can and use our money to have a great time. Shakespeare often used an intelligent fool to make points, with Viola in Twelfth night pointing out the Feste was ‘wise enough to play the fool’. Perhaps that is us? Life’s too short to be serious all the time. I learned a friend of mine died this week, which is another jolt of brutal reality that proves this point. Godspeed Cat, you were a wise fool of the greatest kind and I am fortunate to have known you and spent time in your sardonic presence.


Perhaps, like King Lear, who would only allow one person to question his decisions and that was his fool, his court jester, you can see us as yours.


‘A fool and their money are easily parted’ - proverb

Where did April Fool’s day come from? Some think that one of Chaucer’s Canterbury Tales, the Nun’s Priest’s Tale is the source, where a vain cock (nope, not me, it was a rooster) was tricked by a fox, ‘since March began thirty days and two’ which would be the 1st of April. Is it to do with Fool Desserts being smashed in people’s faces? It turns out, that dessert is from the French word ‘fouler’ meaning to press or crush. So, nothing to do with that.



Fear of being proved the fool that is parted from their money, leads to people not making the moves they should do. Which, in turn, parts them from money that they could have had. It’s the same result, but they didn’t want to prove to be foolish. And in doing so, have proven themselves to be foolish.


One example of this, is investing in stock markets. In 2022, stock markets took a bit of a battering. Inflation and the curative antibiotic of increased interest rates meant that stock market valuations fell. Take a look at the below, at the returns of our most popular portfolios:



We didn’t have many approach us, but there were certainly enough people that were worried about the negative returns received in 2022. A few wanted to cash out (in the end, no one did for investment reasons, just for spending reasons), but this wise fool persuaded them to stick where they were. Why? Because every time EVER there has been a drop in global investment markets, the global investment markets have returned to former highs and beat them to set new ones. There’s some proof of that below, in the MSCI World Index since 1975.



Looks remarkably like a compound interest chart, doesn’t it? You can compare one below:


Source: Monevator: motivation for armchair investors, Compound interest calculator.


Despite that long history of ever-growing company share valuations, people were concerned that ‘this time it was different’ and we weren’t ever going to get those returns again. Some were reaching conclusions that there was no evidence for. Those that disinvested, or didn’t invest more when they should have, are the fools. They have missed out on the rebound and the subsequent beating of former highs. More fool them.


“What the wise do in the beginning, fools do in the end.” ― Warren Buffett

And now we are starting to see people coming to us, saying that they have held on from seeing us, until there was a recovery in stock markets. I see that they have missed out on this bounce back, but they are still wise in investing now. This is a never-ending process of fall and rise to ever higher heights! Once they are with us, they will not act on these fears again (they will still have the fears, but they will have us as their guide, to get them through it) and so they will not be the fools in the end.


Other people that come to see us eschew investing in shares, despite the long-term record of inflation beating returns of company shares. Despite the long-term record of higher returns than any other asset class. They deny all evidence of what has happened in the past. This isn’t a surprise. The news is packed with bad luck / rip-off stories (which don’t happen very often, hence why they are newsworthy). They say they were ‘unlucky’ or ‘a victim of circumstance’ and that it will only be a matter of time before they are proved correct. Like the entrepreneur in Dragons Den that is told their idea won’t work, they continue to work towards something that has no chance of success, because it is only a matter of time…


"Never argue with fools. They will drag you down to their level and beat you with experience.” ― Mark Twain

I must admit that following such discussions, I have ended up believing! Not totally, but I am almost convinced. Until I go back to the evidence and re-read what I already know. Then, I am jolted back to reality to see the truth once more.


I am reminded that there is a clear trend. That the investment process we utilise has a long-term history of success, that hundreds of families that we look after have benefited from it and had successful investment experiences. I am reminded of the thousands of others that have experienced the same at other firms.


But what of other assets? There are not many types of asset that produce growth. Largely, they can be put in these boxes:

Cash: Money in the bank. You are effectively lending this to the bank and they give you a return called ‘interest’. This is the money they are paying you to borrow it from you.

Fixed interest securities: These are loans to governments or companies. Again, they pay an interest rate in as payment for use of that money. It’s a bit like paying rent for use of a property. You know what interest rate you will get, it’s agreed at the outset. But the value of the asset can fluctuate.

Property: Companies or people will pay rent to you, for use of the property.

Shares: Companies will pay you a share of their profits, for giving them money to use in their company in order to try to make more money! You don’t know what you will get, you will just earn a ‘share’ of the profits of the company.


What other assets are there, that don’t intrinsically earn money? These are things such as gold, currencies, cryptocurrency, art, classic cars etc.


None of those will earn money unless someone else comes along that will pay you more money than you paid for them.  


Warren Buffett once wrote: “Gold gets dug out of the ground in Africa or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”


It’s the same with cryptocurrency. It’s not dug out of a hole in the ground. Instead, it is a made-up asset, with restricted supply, that is restricted by the person that invested it. You can’t hold it, you ‘mine’ it through using massive amounts of electricity, then say it is worth something. Then wait for someone to come along to buy it from you for more. But what happens when there is no one else to buy it for more? When no-one wants to? Then, you have an ‘asset’ that doesn’t earn money and you can’t get money back as no one will buy it. Some people are making money from this… but someone is paying. For them to make money, another person has to lose. It’s like a pyramid scheme.


This is known as ‘Bigger fool theory’. Under the premise where a bigger fool than you must pay more money for your asset than you did. That’s the only way they ‘make’ money.


“Oh, how fine are the Emperor's new clothes! Don't they fit him to perfection? And see his long train!" Nobody would confess that he couldn't see anything, for that would prove him either unfit for his position, or a fool. – The Emperor’s New Clothes, Hans Christian Anderson

If you do not know the story of the Emperor’s new clothes, it is about a vain Emperor that was swindled by fraudsters purporting to be tailors that promised him the finest suit of clothes. The fabric would be invisible to anyone that is hopelessly stupid. Of course, no one wanted to admit they were hopelessly stupid so they all said they could see this marvelous suit! Even the Emperor… surely he could feel the cold, right? No! It was just the honesty of innocent children that revealed the true stupidity. Like an episode of ‘Catchphrase’ they said what they saw.


I may very well be the fool. I may be the one that can’t see the potential of gold, crypto and the like. I may very well be the one regretting my mistake at what I missed and beating myself up for being a fool. But at the moment, I am the child that mocks the naked emperor.


“Who's the more foolish? The fool or the fool who follows him?” – Obi-Wan Kenobi

It may be that people jumping on the bandwagon of the new and sexy investments are not the fool, but are simply following the fool! It may be, they are not the fools. Time will tell, it just doesn’t make sense to me. And why would you do it, when something with 100+ years of average returns of 10% a year is available? Companies make money. They make money because people go to work and try to earn more in less time because they want to make their lives better. It makes sense logically. That is human motivation in a nutshell.  The proof is there evidentially in the returns of company shares over time. When logic and proof combine and point in the same direction, then that is a winning combination in my book.


I am happy to be the fool in my meetings. I want to enjoy myself and I want to live a great life, just as I want Lucent’s clients to. I want tried and tested methods that are proven to work and make sense. I want to be really boring in how I invest! I don’t want to be the Emperor. When the tide goes out, I don’t want to be seen to have been swimming naked! I don’t want to see you like that either! As good-looking as you all are 😉



We'd love to help you

We hope you have enjoyed this month’s newsletter, and we would welcome the chance to become your adviser, your counsel. We can help you make the change in your life:

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If you have seen us in the past, and you didn’t think we were right for you then perhaps give us a another try, we are taking on lots of people from other advisers, that haven’t been getting the service they deserve.


If you already have an adviser or want to experience true lifestyle financial planning from the ‘Lifestyle Financial Planner of the Year 2023’ then why not come and see for yourself!

We offer two meetings at potentially no cost to you. The first, we will see how we get on and whether we are a good fit to work together. After all, we will be working together for a long time.


At the second meeting, we will show you exactly what we would do for you and how we would work together. There is a charge for this as most people think it is absolutely awesome.


However, if you don’t and think it’s a load of rubbish, we have a ‘satisfaction guarantee’ so you don’t have to pay. If you think it’s rubbish, I don’t want your money as that would make me feel ashamed of myself.


  • If your adviser is from a large national firm, or a small local one that never replies to you, I fully expect we will be more cost effective, and also have a more rounded and enhanced service.

Or

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Or

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then get in touch on 0121 705 1000 or info@lucentfinancialplanning.co.uk

Or visit our website, and check out our advisers: www.lucentfinancialplanning.co.uk 

 

Interested in finding out more about investments?

Email us on: support@lucentfinancialplanning.co.uk saying: Give me Ubuntu!

 

If you would like to meet some of us first, but don’t want a full meeting yet then you can join one of our events:

Investment /Retirement Seminar at Crowne Plaza, Solihull.

  • Retirement Income

25th April / 27th June

  • Investing in Uncertain Times

23rd May / 25th July

 

Or, one of our Walks

Join us and some of our clients for 5-7 miles of fun and banter in the Midlands countryside - next one is 9th April.


 

 

Prefer to hear from the horse's mouth? Here's what some of our clients have said about working with us.  

"Very friendly approachable staff, highly professional and take care of everything - no hassle. Steve Rowe is very knowledgeable, proactive and easy to discuss things with, and his team are excellent. They are focused on me as an individual and understand my individual needs and priorities. I would recommend them to anyone wanting the best advice with no hassle, and maybe who also enjoys a nice walk in the countryside with fellow clients and a very tasty burger in the summertime." - Matt H

"Always a five-star experience with Steve at Lucent. Complicated concepts are explained clearly, but without being patronising. Sound objective advice from a really trustworthy source." - Suzanne L

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