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Just Being Average

Jeffrey K. Actor

MY FATHER RAISED ME to think that, if I set my mind to it, I could do just about anything. He said that concentrated focus and drive would allow me to reach my dreams, and that there was rarely a time when I should settle for average.

Maybe it’s no great surprise, then, that I hate being average. I’m above average in smarts, the kind that gets you a side order of noogies as a second grader. Luckily, I’m also above average athletically—or fancied I was until I hit middle age. This helped avert a number of swirlies in junior high. If you’re not familiar with swirlies, count your blessings.

The pendulum, of course, swings in both directions. I’ve always been below average in certain ways. Such as height. It’s not so bad. I make up for it in width and depth. I didn’t hit five feet until my freshman year of college. Good for me that I kept growing, at least for a little while longer.

Still, my father taught me to be average in one special way, an exception to his other teachings. He recommended that I have average expectations for financial market returns, and that I use that “average” mentality as the basis for my long-term investment strategy.

He also had three specific pieces of advice. First, live below your means. Second, automate savings so those savings are sure to happen, rather than waiting to see what’s left over after paying that month’s bills. And, most important, invest your long-term holdings in a solid fund that mimics the entire stock market.

In my 30s, I spent time chasing returns. I would discuss some of my stock picks with my father. He always listened patiently and asked why I chose this or that company. He wanted me to describe my rationale for buying and selling. He never criticized my investment choices, but he did highlight the need for due diligence.

Overall, my stock picks didn’t prove to be winners. I was just buying on hunches. I didn’t have a solid plan, instead making purchases based on hype and news without knowing the full context.

Eventually, it dawned on me that—by the time information reached me—it was already past the point where it offered any advantage. More often than not, I caught a stock just before its peak and ended up selling in time to capture significant losses. Economist Eugene F. Fama has described the market as “informationally efficient,” meaning all available information regarding the current and future state of a company is fully reflected in its share price.

It’s incredibly easy to underperform by chasing dreams. It’s incredibly hard to pick the next Apple or Amazon. It’s nearly impossible to outperform trained professionals.

Another of my father’s little secrets: “Simplicity is the master key to financial success,” he’d say. For most of the past three decades, I’ve stuck to this philosophy.

I came across my father’s little secret while reading a classic by John C. Bogle, The Little Book of Common Sense Investing. Most know Bogle as Vanguard Group’s founder. He’s also remembered as the creator of the first index mutual fund. Rather than owning a piece of the market, he advocated investing in the entire market through a low-cost index fund.

Long-term investors can achieve success by matching, not beating, the market. It’s insanely simple to match the market’s return, minus some small sliver for expenses. The patient investor can capture the hopes and dreams of a noisy market just by standing still. All you have to do is be humble, and tell your ego that it’s okay to accept the market’s average return.

Although I’ll never know for sure, my guess is that Dad read Jack Bogle’s writing and took his ideas to heart. I also have a sneaking suspicion that my father was a Boglehead, the community of investors inspired by Bogle’s philosophy. Even if he never said it, Dad followed their investment practices.

I’m now entering retirement, leaving a career where my goal was to be anything but average. I’m confident that my retirement will be financially stress-free because I adhered to a few simple edicts that my father taught me early on—including knowing it’s okay to be average when investing.

Jeffrey K. Actor, PhD, was a professor at a major medical school in Houston for more than 25 years, serving as an academic researcher with interests in how immune responses function to fight pathogenic diseases. Jeff’s retirement goals are to write short science fiction stories, volunteer in the community and spend time in his garden. His previous article was Wisdom of My Father.

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