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Investment Commentary

Know the Game You’re Playing

By Jon Henshue | Johnson Financial Group • August 31, 2023

4 minute read time

As the final days of summer draw to a close, I recently felt the urgency to embrace some traditional summertime activities with my daughters before the rushed days that come with the start of the school year. So, we headed to the nearby miniature golf course for some fun and, of course, ice cream.

The course sports all the familiar elements you expect from a miniature golf course: unusual slopes, prominent hills, and disguised tubes to hidden putting surfaces. As an avid golfer and competitive person, I couldn't help but aim for a low score. After missing several short putts, I found myself growing irritated with my poor performance and what this suggested for my next round on a real course. At that moment, I realized I had lost track of the game I was actually playing. With a rubber mallet for a putter and steeply ramped jumps on the holes, I certainly wasn't playing a real round of golf. In reality, the game I was playing wasn't even mini golf. The game I was playing was being a Dad. I intended to spend quality time with my daughters and build some good summertime memories. Focusing on anything other than being successful at that game, in that moment, was a distraction that could prevent me from achieving my original goal.

It's my observation that investors often suffer from similar mistakes. Especially in a world that is increasingly full of distractions, investors can find themselves playing a game they hadn't intended. It could be the CNBC headline game, the impact from the next election game, or the hot investment idea from my neighbor game. In most circumstances, inadvertently playing such games distracts from the true game the investor is trying to win.

Our clients have commonly won the game of generating a significant amount of wealth and, with that good fortune, are looking to secure that wealth for themselves and their families into the future. They want to live a good life and not worry about what they've worked so hard to build. Winning that game requires decisions and discipline that are quite different from the previously mentioned games and others like them.

Each investor must choose the game that's right for them. It might be the generate the highest returns game, the consistent income game, or the risk mitigation game. Each of those is a legitimate game to play, but success comes with a different course of action to win. At JFG, it's our responsibility and intention to help our clients establish their investment goals and keep them motivated and accountable for playing the game consistent with those objectives.

Given the current economic uncertainty and notable changes across financial markets my colleagues have written about in recent investment commentaries, we’ve positioned portfolios defensively within the guidelines of each client account. Portfolios may also benefit from complementary allocations to alternative strategies. When you know the game you’re playing—say, long-term returns—decision-making about portfolio components becomes easier. In my own work managing clients’ allocations to alternative investments—which may include real estate, private debt, diversifying hedge funds and more—I’ve seen clearly how none of these strategies are game-winners on their own … but they may serve to balance a portfolio with additional diversification. That can help with risk-adjusted returns, so if your game includes wanting to sleep a little better at night, you may find benefit here.

As for my afternoon miniature golf adventure, I'd call it a success. I don't remember what my score was, but I’ll always remember my daughters enthusiastically racing around the course and enjoying their post-round, build-it-yourself frozen yogurt.

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