Because of recent volatility and disappointing results this year, some people are questioning their investments. Instead, one should remember that a good investment strategy (like a good relationship) will have some unpleasant times, but it will reward you for a lifetime.

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By Todd Beaird (TMF Synchronicity)
November 7, 2000

I'm a married man now. Sorry to be away last week, but we had our wedding just over two weeks ago, followed by our honeymoon. I'm still getting used to wearing a wedding ring, and saying "wife" instead of "girlfriend." I don't feel "married," but it'll sink in sometime.

Unfortunately, the honeymoon is over and it's back to discussing investing. Originally I was going to discuss some of the shortcomings of the Sharpe Ratio, but with all this life-changing stuff on my mind I thought we might step back and take a broader view of investment strategies.

The last few weeks have been fairly volatile in the market, especially for our Workshop strategies. Overall, this has been a tough time for stock investors. The major indices are down for the year, and our Workshop strategies have not done much better. All of this has caused some people to start playing "woulda, coulda, shoulda" with their investments. "If only I'd sold back when I was up 25%! Now I'm back to breakeven!" Other people have proposed some modifications to our mechanical strategies.

On the one hand, additional research on mechanical investing strategies is a good thing. Most of our developments in the Workshop have come from the tireless efforts of our community. Their work is what makes the Workshop such a vibrant, growing place.

On the other hand, our goal at the Workshop is to develop solid, long-term strategies. Much of the recent discussion might be little more than overreactions to short-term disappointment.

When my wife and I were planning the wedding, we got into several arguments. We were both very busy, attending to the hundreds of details involved, as well as our jobs. It was stressful, and we weren't as forgiving toward each other as we normally would be. I'm sure those of you who are married are nodding your heads and thinking back on your own wedding.

Similarly, when you invest, there will be times when the market treats you poorly. Some international event will occur to spook the market, or some large company will come out with a bad earnings report on the same day an analyst on CNBC proclaims that the market is "overvalued."

My wife and I had our disagreements just before the wedding, but of course we never thought about breaking up. We simply knew that we were going through a strenuous time. Likewise, an investor shouldn't think of abandoning a good strategy just because it's been disagreeable the last few months.

A good relationship is a long-term project. It's not a process ("work at marriage") with a definite goal ("happiness"). The process is the goal. You have to work at a marriage every day, but if you do so with the right person, you'll be rewarded with a lifetime of happiness. A successful investor has a similar approach.

In the past, I've likened investing to a process, with a goal of financial independence. But, is that really correct? The more I think about it, investing is essentially managing your finances to ensure that you are as financially secure as possible, both now and in the future. You never really end the process.

Good investors always live below their means (whatever those means might be), so they can withstand a financial crisis. Good investors have emergency funds stashed away in a money market fund, and keep money for near-term expenses (like a house down payment in the next few years) in a low-expense bond fund or similar investment (these are what I refer to as "Bucket A" and "Bucket B" funds). It also helps both your investing and your marriage if you and your spouse are on the same page regarding finances.

Good investing isn't based on a few good stock picks, and the occasional rough patch isn't necessarily a sign of bad investing. Good investing is really about instilling solid financial habits and maintaining them. If you do that, financial independence is bound to follow. Just like a good relationship, the process is the goal.

That's all for now. On this election day, I urge all you Fools to get out and vote if you haven't already. Regardless of your political beliefs, make sure your voice is heard -- vote! We'll be back to discuss the Sharpe Ratio next week -- same Fool time, same Fool channel.

Editor's note: Marriage is breaking out all over the Workshop! First Todd and Jenny, then last week Sux2BeU and Malachite (our first couple to propose and accept on a discussion board) did the deed. We know they may have down periods, but the long-term trend will always be up.