No, this doesn’t refer to a sign of affection or to the musical band, but rather to another phrase that I will share in few moments.
During my 20+ years at Sigma, I have been involved in two very unique situations that have produced the same results. One situation was a lottery winner and the other was a professional baseball player. My role as portfolio manager was to be conservative and prudent with their dollars. However, both parties spent their money as if it were going to be available forever. Despite my strong reminders of our initial game plan, my voice wasn’t heard, or it was heard but ignored.

As I watched these two situations unfold, I saw different factors edge in and, before long these clients were left with nothing. We had discussions about the greed factor creeping in, as with money often comes a degree of confidence and invincibility. I also suggested that maybe guilt was playing a role. Family members and friends were trying to guilt both parties into giving them monetary help. There was even a point when I offered to call the people requesting help and discuss their financial needs. To add to the situation, these clients both became instant business men. They knew everything about running a business and managing money. Both clients wanted more than they already had. In one scenario, the client had won a $20 million dollar lottery and was going to receive $667,000 after taxes every year for 20 years. The other client had close to $18 million after his playing days were over.

Our job as portfolio managers is to advise our clients and to do everything possible to make sure that they have a high probability of success. The road to success is laid out in a game plan that is established and agreed upon by both parties. This agreement is formed during the beginning stages of planning and spelled out in our Investment Policy Statement (IPS), and serves as our marching orders. The IPS also provides transparency, which is used to protect our clients and to protect us.

Now I will share what KISS stands for, although I am certain that most, if not all, of you have heard this before. KEEP IT SIMPLE STUPID! It is in our nature to want more – but when can we clearly see that we have enough? At Sigma we come across investments on a daily basis that can seemingly do more for our clients than our current choices. We take the time to evaluate these investments and typically come to the conclusion that they are not in line with our client’s needs. Most of our clients have accepted the KISS principle, but the cases discussed above did not.

I have always been told that with age comes more wisdom. I can attest to that and add my own piece of advice – Keep It Simple Stupid!

Thoughts and questions welcome.

Dave Bergman