Two Wealth Building Tips from William Shakespeare That are Still True Today

Two Wealth Building Tips from William Shakespeare That are Still True Today

College is now out for summer and I see more interns walking around the financial district than usual at lunchtime. Seeing more of these young folks around made me think back to what I learned in college that I am still using today. Many of my long since forgotten classes no longer resonate with my current reality as a business owner, however, my general education class on Shakespeare left me with several philosophical lessons in life that still help guide me daily.

As a Certified Financial Planner™ I think the bard was very wise. Two quotes from two separate works stick out to me as relevant. Together, they are the very tenants of wealth creation and part of the framework for what I believe leads to financial success. If you implement the two in concert, success is likely assured.

 

The first piece of advice the bard makes is that you must always be investing.  “Foul-cankering rust the hidden treasure frets, but gold that’s put to use more gold begets.” – Venus and Adonis

The poem refers to Venus, a goddess who is trying to convince Adonis –  a mortal – to be her lover. While it isn’t directly referring to investing, she is saying that you cannot make gains if you don’t take risks. Or as writer Heather Long puts it, “putting money (or gold) under the mattress or burying it in the backyard doesn’t do much.” The simple lesson here is that you should be putting away as much as you can and let compound interest do the rest. Alas, sadly, most Americans don’t see the benefits of owning stocks as this chart below highlights.

Americans in the stock market

While evidence to the contrary is overwhelming, less than a quarter of Americans believe stocks are the best long-term investment.

Americans choice of investments graph

 

Even worse, Americans have more than $11 trillion dollars of cash sitting in bank accounts, more than half the market capitalization of the entire US stock market. That much cash not being invested really shows that many Americans are shoving their cash under the proverbial mattress. Instead they should heed the advice of the bard and take action …but gold that’s put to use more gold begets.”

 

The second piece of advice the Bard gives is that you must be patient. “How poor are they that have not patience!’  -Iago in Othello 

While we all know that patience is a virtue, in this fast-paced, instant gratification oriented modern world it is easy to forget that time, if used wisely, is on your side. At RHS Financial, we believe in value investing which historically over time has proved more profitable than many other strategies. Value investors must employ patience as there will be times that they will underperform but in the long-run, their conviction will pay out in the form of outperformance. During the late 1990’s pundits of growth companies had said that Warren Buffet had lost his touch. Where is Warren Buffet today and, more importantly, where are those pundits today? Take a look at the graph below that shows value stocks in the United States have underperformed their relatively expensive growth oriented peers in recent years.

Value Vs Growth short run

If you look over the longer term however, you can see in the chart below that value oriented stocks have outperformed growth stocks. Since 1926, the cheapest 30% of stocks as measured by the price to book ratio have outperformed the most expensive 30% of the market by 3.3% a year in the US, resulting in an order-of-magnitude difference in final wealth. After reviewing these kind of results, we see the wisdom in the bard’s words “How poor are they that have not patience!’

Value vs Growth Long Run

History still has much to teach us. Centuries ago Shakespeare at Stratford upon Avon could never guess what Wall Street would mean to the World economy in 2016, he did however understand human behavior. That’s why he was such a good playwright. Most of his plays were based on love, lust, power, fear and greed. Many would say that fear and greed are synonymous with today’s markets . In many of his plays and poems, he encouraged people to focus on what they could control. The Bard’s centuries old advice is still relevant. Plain and simple, let’s make sure that we are always investing and that we have patience in that process.

Disclosures: This post is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by RHS Financial, LLC unless a client service agreement is in place. Please contact us at your earliest convenience with any questions regarding the content of this post. For actual results that are compared to an index, all material facts relevant to the comparison are disclosed herein and reflect the deduction of advisory fees, brokerage and other commissions and any other expenses paid by RHS Financial, LLC’s clients. An index is a hypothetical portfolio of securities representing a particular market or a segment of it used as indicator of the change in the securities market. Indexes are unmanaged, do not incur fees and expenses and cannot be invested in directly.

2024 Disclosures

RHS Financial is an SEC registered Investment Advisory Firm and distributes this presentation for informational purposes only. This presentation ( hitherto referred to as the presentation throughout this disclosure), blog post, infographic, slide deck or whatever form of informational modality the reader wishes to describe this as is provided for informational purposes only and should not be construed as investment advice in any way.

We believe the information, including that obtained from outside sources, to be correct, but we cannot and do not guarantee its accuracy in any way. RHS Financial uses information from outside sources to develop graphs, charts, infographics, etc. to enhance this presentation and while we believe the information from these outside sources, to be correct, we cannot and do not guarantee its accuracy in any way,

Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors who may be employees of but do not necessarily reflect the views of RHS Financial as a company. There can be no guarantee that developments will play out as forecasted. The information in this presentation is subject to change at any time without notice. This presentation contains “forward-looking statements" concerning activities, events or developments that RHS Financial expects or believes may occur in the future. These statements reflect assumptions and analyses made by RHS’s analysts and advisors based on their experience and perception of historical trends, current conditions, expected future developments, and other factors they believe are relevant. Because these forward-looking statements may be subject to risks and uncertainties beyond RHS Financials’ control, they are no guarantees of any future performance. Actual results or developments may differ materially, and readers are cautioned not to place undue reliance on the forward-looking statements. In a nutshell; these are our best guesses and please don’t assume they are fact.

Mentions of specific securities, investment products, investment indices, companies or industries should not be considered a recommendation or solicitation. Data and analysis does not represent the actual or expected future performance of any investment or investment product Index information is used to illustrate general asset class exposure, and not intended to represent performance of any investment product or strategy.

This post may contain references to third party copyrights, indexes, and trademarks, each of which is the property of its respective owner. Such owner is not affiliated with RHS Financial and does not sponsor, endorse or participate in the provision of any RHS’ services, or other financial products. Index information contained herein is derived from third parties and is proffered to you unaltered as we derived it from the third party.

RHS Financial, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where RHS Financial, LLC and its representatives are properly licensed or exempt from licensure. This presentation is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by RHS Financial, LLC unless a client service agreement is in place.

If the client is deemed suitable and agrees, RHS may employ leveraged strategies for these clients. Leverage attained through margin on a client’s account can add additional risk. While RHS tends to seek to improve return with theses strategies by applying leverage to less risky indexes, there is no guarantee that that RHS will lower risk or improve returns.

RHS Financial. 4171 24th St. Suite 101 San Francisco, CA 94114

Risley Sams

Risley Sams

Risley Sams, CFP®, MBA, CPWA®, is the Founder and President of RHS Financial. He is responsible for the future of the firm and the strategic services that we deliver.