Financial Health: Lessons from the Doctor’s Office

When we think about health, our minds often drift to physical well-being—routine checkups, balanced nutrition, regular exercise, etc. Interestingly, the principles that keep us physically healthy are somewhat parallel to those that lead to long-term financial stability. If you would indulge me for a bit, we’ll explore this compelling analogy.

Get Routine Checkups

As the saying goes, “An ounce of prevention is worth a pound of cure.”  Regular checkups or physicals are important. Through a series of tests and conversations, your healthcare provider can assess your current physical condition and guide you on the right path for a healthy future. Similarly, periodic financial reviews are important. They provide the opportunity for your advisor to make a full assessment of your financial position. As vulnerable as it may feel to lie on the financial “examination table,” your openness and transparency are crucial. This is the time to share current life events and future plans, specifically those that will cause your financial position to change, such as big purchases. Of course, life is unpredictable, and it is impossible to foresee every event, so you should also let your advisor know of any unexpected changes, such as a job loss, as they may occur.

Adhere to the “Prescription”—Not All Advice is Qualified

Chances are, you don’t take it upon yourself to up your dosage of a prescribed drug from 10mg to 80mg no matter how compelling the article you just read on ‘Dr. Google’ may be. Among other things, your actual doctor takes into consideration factors such as your age, weight and family history when determining a suitable treatment; all of which a general article intended for millions of readers does not do. You also trust that your doctor’s prescription is backed with proper training and expertise.

Similarly, you should trust that your advisor possesses the skill and fiduciary duty to put forth a well-suited financial plan, taking into consideration factors unique to you, such as your age and income. Avoid taking financial advice from unqualified sources such as media outlets. While CNBC may be a good and entertaining way to stay current with market events, views and opinions expressed on this and similar platforms should not be taken as personal or even qualified advice. At best, they give general market consensus but fail to consider details unique to your financial position, which can make an otherwise good investment bad for you.

Read the Label

Food labels give valuable information about a product, such as its ingredients and expiration date. Similarly, documents such as financial statements give an inside view of a company’s “nutritional content.” Consistent earnings, high cash flow, and low debt are signs that a company is in good financial health. Other documents that provide details about fees, taxes, and restrictions are also important, especially for self-direct accounts such as employer 401(k) plans. A fancy pitchbook coupled with a persuasive tone does not necessarily equate to a sound investment product.

Follow the Plan

Crash diets do not work. They may provide a temporary solution, but often ultimately result in your being worse off and further away from your intended goal. At Bragg Financial, we believe several things about investing for the long haul:

The market is efficient.

The market quickly processes publicly available information, which is reflected in prices almost instantaneously. It is therefore impossible to consistently beat the market. That is why market timing and other reactionary or speculative tactics based on social, political, or even fiscal views are not a good idea; neither are they sustainable. For example, data show that the stock market tends to rise regardless of which political party is in power and how much they’ve added to the federal government’s debt level. Base decisions such as whether or when to buy or sell stock on a thorough analysis.

Traditional asset classes are timeless.

Alternative assets have become increasingly popular; however, as Benton Bragg cautioned in his 2024 Q2 article Mont Ventoux, they should come with a buyer-beware disclaimer. Alternatives are usually associated with high fees, lack of transparency, illiquidity, and volatile performance.

To that end, we believe that stocks and bonds are the building blocks of a well-diversified portfolio. I admit, there’s nothing particularly exciting or innovative about bonds, but they get the job done. Bonds are a great stabilizing complement to stocks because the two tend to move or perform in the least similar manner, resulting in lower risk and higher diversification. This is especially beneficial in down markets when stocks are underperforming.

Discipline is the name of the game.

Financial stability comes through a series of consistent and sometimes tough decisions. It takes discipline and perhaps even a bit of egotistical sacrifice not to feast at the “I-Own-the-Hottest-Newest-Investment-Products” roundtable. In his article, Benton goes on to reiterate a recent quote by Warren Buffett: ‘”‘No form of investment vehicle produces investment results.’ Not hedge funds, not private equity funds, not mutual funds, ETFs or insurance contracts. Good investments made by good investors create investment results.”

Understanding your goals, following the advice laid out by your advisor, and avoiding the lure of glitzy investment fads are vital components of a financially healthy lifestyle. Stay committed and you’ll find that, as with your physical health, a disciplined approach to your finances will help bring peace of mind, greater freedom, and long-term success.

This information is believed to be accurate at the time of publication but should not be used as specific investment or tax advice as opinions and legislation are subject to change. You should always consult your tax professional or other advisors before acting on the ideas presented here.