Apples 🍎 & Oranges 🍊
Good morning!
First of all, thank you.
Many of you replied to last week's email and sent me your ideas and suggestions for future topics and podcast guests.
I really appreciate it.
Please keep 'em coming...
Today, I'd like to start with an article I wrote a few years back titled "Warren Buffett is Wrong."
And my opinion of Mr. Buffett on this particular issue hasn't changed in the years since I wrote it.
I could have also titled that article "The Wrong Index."
The Oracle of Omaha's advice to use an S&P 500 index fund instead of chasing individual stocks is sound advice.
I'm just not sure why he would stop at the 500 largest U.S. companies (the S&P 500 index) when there are literally thousands of other companies available through a broader index which offers MUCH better diversification.
And that's just U.S. based companies.
So that's where I think he's wrong.
OK, stay with me here because I'm about to make a seemingly unrelated leap...
Did you know that Dwayne "The Rock" Johnson is fat?
Yep, this guy!
Now, I'm guessing many of you must think I'm crazy.
But at his height and weight, The Rock has a Body Mass Index (BMI) over 30.
According to health experts, ideal BMI for an adult is between 18.5 and 24.9.
Thus, The Rock is technically obese.
And while no one would ever mistake me for The Rock, I'm obese too.
A recent physical pegged my BMI at 25.5.
So what gives?
Well, the BMI doesn't tell the whole story.
It doesn't take into account a person's body composition. Things like muscle vs fat.
And since muscle weighs more than fat, BMI can be misleading.
Or just plain wrong.
So back to Warren Buffett...
I believe and wrote about why Mr. Buffett is using the wrong index.
And just like BMI is a questionable measure of overall physical health, many of you might be measuring your financial progress and success the wrong way.
See what I did there? 😉
You might be comparing apples & oranges.
While many people rely on crude measurements like their portfolio balance or net worth, that doesn't tell the whole story either, does it?
I've met people with A LOT of money who spend every dime they earn. And then some.
And I've met people with a much more moderate amount of money, yet they live comfortably within their means.
Most folks fall somewhere in between these two examples.
I've written before about using "MDI" as a good measure of your financial health.
But I'm here to tell you there's an even better measure...
And here it is:
It's whether or not you're on track to achieve the things that are important to you and the people and organizations you care most about.
This transcends the amount of money you have or how much you make.
In fact, it doesn't even matter how much you spend.
As long as at the end of the day, whatever you're doing keeps you on the path to achieving your personal version of success.
You do know where you're going, right?
Remember last week when I wrote about "directions?"
Otherwise, whether it's your BMI or your Net Worth, unless you're making smart decisions to deliberately propel you toward your desired financial future, you might just be comparing apples & oranges.
If you'd like to evaluate the path you're on, get in touch and let's talk about it.
It's what I do...
Links & Things
Listen in on my latest podcast conversation with Alicyn McLeod, a friend and Atlanta-based CPA and CFP. We had a fun conversation.
And be sure to subscribe in your favorite podcast app and leave a review if you feel so inclined...
Once again, research shows that there's often a significant difference between "investment" returns and "investor" returns.
Thank you, as always, for reading.
Until next Wednesday,
Russ
P.S. > Be on the lookout for a reader survey coming in the next week or two. Really want your feedback about my writing, my podcast, and other ways I can help with education (and maybe a little entertainment along the way).