When was the last time you thought about Play Doh? You remember Play Doh, don’t you? That malleable half pound of coloured clay you loved as a kid? I bet the inner child in you would still enjoy Play Doh. I am spoiled right now because the adult me gets to be a bit of a kid and play with Play Doh - one of the perks of having two young children at home. I won’t get started on Lego!
What about Barbie? Or Mr. Potato Head? Let’s not forget Etch-A-Sketch either. I could rattle off even more toys found in Toy Story but I think you get my point. Children’s toys, the truly successful and long-lasting ones, have a common characteristic. Their beautiful simplicity.
Steve Jobs is one the most celebrated businessmen of our time. He had a knack for being difficult and hard-headed but also for understanding how to make complex things very simple. The iPhone is advanced technology, but is USING an iPhone difficult? No. It is beautifully simple and therein lies the point Jobs is making.
Finance is another thing that can be really complex, but do the solutions to these complexities also need to be complex? That’s the million dollar question. If you looked at the website of any major asset manager you would see dozens of different funds that cover all kinds of special circumstances. Need your savings to kick off a 5% per year income in retirement? Here’s a T-series for you. Worried about currency rates? We have a currency hedging program that is second to none. Want an investment that changes its asset allocation over time with a specific retirement year in mind? Hello, target date funds!
Instead of working hard and thinking clean to make it simple, we have turned asset management into a mess. I think that is why Index ETFs have boomed in the past decade. They are beautifully simple for people to understand. You put your money into the S&P 500 and you get the 500 largest companies in the United States. When you get the alert on your iPhone that the market hit new highs, you implicitly understand that your investment hit a new high. That simplicity has moved a mountain of money in 10 years.
The next time you sit down to review your finances, ask yourself this: have we done the hard work to make this as simple as it possibly can be? If your answer is no, then you have more work to do.
Sam Rook, Investment Advisor
Helping clients achieve beautiful simplicity
in their finances every day