Milestones. They mark our lives, over the long term and the short term. Communions. Bar Mitzvahs. Sweet Sixteen’s. High School Graduation. Driver’s License! We’re big on milestones. They’re important. They helps us keep track of where we’ve been, and to look forward to where we’re going. Two of our big ones come every year. We celebrate our birthday no matter the age. And then there’s the New Year.
It’s a milestone shared by all at the same time. And we mark it accordingly. We have lists. Top 10 lists generally come out now. Lists of those we’ve lost; people we know and will personally miss, and those who have had some effect on our lives. Family, friends, athletes, stars. Movies come out in time to make the Oscar voting for this year. It’s big. Big enough we need Times Square in New York to contain a few hundred thousand revelers at the same time. And it’s not just the United States. This plays out globally every hour, depending on your time zone, in similar but somewhat different ways. Each country has its own celebratory customs, but they all share one common theme. A feeling of looking back and looking forward, all at once.
And this also comes into play in our investments. Did you do well this year with your (or your advisor’s) choices? Was it a tough one that you’re glad to close the book on? That last part is the one literal milestone here; we close our books. We made money or we lost money. But we count it at year end. So does the government. We log our profits and losses as of the end of the year to help determine our tax burden, or refund. So everyone is paying attention.
As a trader in the pit, this milestone came figuratively every day. The market actually closed every day back then, and as such, we tallied our profits or our losses daily. And in order to survive the profession, we considered it a milestone of sorts every day. If you patted yourself on the back into the next day for making money, you probably managed to ruin it to some extent when the market reopened. And if you came in thinking “I’m going to get yesterday’s losses back,” well this too often didn’t end well. And so every day, the best traders found a way to block out yesterday’s results and start fresh. It was a means of survival, and those that did it the best seemed to have more of those good days than those who didn’t.
Not every day in the pit was a good one. Not every day in the pit was a bad one. A mentor taught me, after a good day, go home, have a quiet night and get up fresh tomorrow ready to make money. Not make money again. Just make money. A bad day? Do something good for yourself, he said. You just lost hundreds or thousands of dollars. Will a nice dinner out really cost that much in comparison? Generally not. But after dinner I felt better, more relaxed. Ready to go back tomorrow. A really bad day might require buying a new television to really feel better, but the idea was the same. Balance. Even keeled and ready to think straight about the mission at hand the next day.
The great part about December 31st is that it really forces you to follow that thinking. Because if you had a good year, it’s over; and the reminder is a tax bill. Now that’s not entirely a bad thing. I come from a family of accountants, and as such was raised to believe that if my tax bill is bigger this year (politics and changing tax rates notwithstanding), I should smile because it means I made more money. And if you lost money, well the government is going to give some of it back in a fashion. But either way, December 31st is book closing day. A milestone.
No matter your results, or your investing style, embrace this opportunity to start fresh. It’s what celebrating the New Year is about. Don’t spend too much time or effort thinking about your 2016 results. That’s not to say ignore what happened. Take stock (pun intended). What made the year successful? What made the year not so successful? What did you do right? What should you have done differently? That is how we get better. But over congratulating ourselves or obsessing over losses can easily become counterproductive. It’s done. Over. Fini.
Most of us don’t have to reset every day. You might reset every month or every quarter if it works better for you. But no matter what, you have to reset at the end of the year. That annual milestone that isn’t your birthday. Sure, that’s an annual milestone, but it’s date is personal. This is the one we all share at the same time. So my brief bit of advice is no matter what, enjoy the New Year celebration. Life has many ups and downs that we can’t easily reset from. Investing isn’t one of them. Embrace the opportunity to start fresh. Move forward with optimism, and don’t treat every profitable or losing day as if it is your overall result. It isn’t. December 31st is. And that’s what’s great about milestones. They’re markers; they mark the end or beginning of something new. So review your year, plan for 2017. And move on ready to increase your tax bill for the right reasons. Because in another year, it’s time for another milestone.
Thanks for reading the last few months. I wish everyone a happy, healthy, and of course, prosperous 2017. Talk to you next year.