Why Investment Returns Matter

By Tom Stadum

Read Time: 5 minutes

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Hi everyone, Tom here!

The markets had an ugly week.

I am hosting a free webinar on Tuesday at 10AM CT to discuss what you need to know and a few ideas of what to do when markets sell off.

I will be joined by my colleague Jacob Radke, who heads up our investment research at Fjell.

Sign Up Here.

Ok, today. We’re talking about how to retire faster by knowing your investment track record.

Let’s go.

Your track record is everything.

Your money is, hopefully, growing.

How fast it grows over a year is called your investment performance.

Your investment performance, put together over a period of years, is called your track record.

Your track record is one of, if not the most critical, numbers in your financial life.

The better your track record, the faster you can retire.

Ask any pro-investor what they care about, and it's their track record.

Warren Buffett's track record is just under 20% a year from 1965 to 2023.

It's his legacy, the proof of his skill, and by caring about it, he's reached the elusive $100b club.

Good for him.

You have a track record, too, and you should do everything possible to have a great one.

If you have a bad track record over your career, here's what this will actually lead to:

• Working longer

• Having less in retirement to do fun stuff (travel, golf, buy your dream car, etc.)

• Reliance on politicians for your Social Security

• Less freedom.

This list is extremely motivating. I don't want these things. I want great returns and a great track record.

The could’ve-been-a-millionaire crowd.

There are some 24 million millionaires in our country.

People don't openly admit this, but being a millionaire is incredible.

I've never spoken to someone who has regretted or hated having seven figures.

It’s awesome, but getting there takes a ton of effort.

How much effort?

Like 40 years worth.

Interestingly enough, and not surprisingly, the average age of a millionaire is around 61.

But there are millions who "could have been millionaires" if they had simply earned an extra 2-3% a year on their investments over their careers.

If they had made a few different investing decisions over their career, they would be in a completely different financial spot.

Here's a screenshot of two identical, hypothetical people, Brad and Jane, and their returns over the last 18 years of their careers.

Note: Brad and Jane have the same income, retirement date, savings rate, and spending rate. The only difference is their returns.

Here is Brad's returns over the last 18 years of his career:

Here is Jane’s returns over the last 18 years of her career:

Brad got a 7% return over time, while Jane got 4%.

Brad ended up with $1.2m

Jane ended up with 764k.

That’s $460k less!

Dang.

Brad, with over a million in assets, will have more confidence in retirement, knowing he hit the seven-figure mark.

Furthermore, Brad's assets will compound their assets faster than Jane's.

Jane will likely feel tighter, be more stressed, and worry more about the dreaded nursing home than Brad.

Furthermore, Brad's 60% larger portfolio will produce 60% more income.

In every way, Brad's will feel freer than Jane in retirement.

All because he got slightly better returns over the last 18 years.

And here lies a common problem—returns are really important. Still, most people have zero clue how fast their money is growing, whether their portfolio is producing the results they need, or even if they are making money in the first place.

Your track record is your freedom

Do you know your track record?

I can tell my wife Camila exactly our track record for growing money.

Right now, the stock markets are selling off, and I am gauging what this means for our portfolio's performance and how it affects my track record.

Furthermore, I know exactly what my portfolio is doing right now.

I ruthlessly manage my portfolio, tell it what to do, and judge it constantly.

If things aren't working how I want them to work, I fix it.

I can do this because I know what's happening with my money, how I want it to work for me, and how to grow it better.

I am also painfully aware of the consequences of bad returns.

I want the results of an excellent track record; the above is needed to ensure it.

Here's what an excellent track record actually gets you:

• You pay cash for things.

• You buy a second home.

• You travel.

• You pay for your kids' college.

• You give money away to causes you care about.

• You feel confident.

• You retire when you want to retire.

• You go out to eat when you don't feel like cooking.

• You hire people to do things you don't like to do.

• You pursue hobbies you love.

• You stay healthy.

You become Tired & Rich.

So, this week, look at your track record.

Simple as that.

And here are four posts I have written that can help you earn better returns.

1. How fast your money will double.

2. Why Warren Buffett is so good at investing.

3. Your best assets should be your biggest assets.

4. Think in math (critical stuff you need to know about your money)

See you next week.

PS—In two weeks, every one of our clients at Fjell will receive a detailed analysis of their portfolios we manage—their performance, allocation, cash flow, exposure, YTD tax information, and more—the very information they need to ensure their money is working for them. If you want this kind of support as you build your wealth, head over to fjellcapital.com to learn more about our team and what we do for people.

Numbers

S&P 500: $5,347

US unemployment rate: 4.3%

The largest 1-day increase in value: Nvidia adds $329 billion (Wednesday)

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