What is Objective Investing? Part III
Facts are Values
Goal setting is at the core of financial planning and goals-based investing is nominally important to most advisory services. So much so that when an advisor is asked what makes them different, they all same the same thing.
But to objective investors, their chosen values become the performance benchmark itself and to sacrifice them for lesser values - such as beating the market, is not an option. Instead, this short essay will help you understand that the integration of competing objectives with the uncertainty of capital markets is possible and more reliable because investment strategy is subordinate to your goals and aspirations.
Even though they are man-made, markets share one aspect with nature itself: they are indifferent to your health, prosperity or happiness. For those who believe that nothing is certain, no one is perfect – just be kind, that fact is their justification to denigrate markets while exploiting them for personal gain. In contrast, philosopher Leonard Peikoff explains,
In the objective approach, since every fact bears on the choice to live, every truth necessarily entails a value-judgment, and every value-judgment necessarily presupposes a truth.
To concretize that for objective investors, page 220 of The Moneyball Method offers a tool called the Facts and Values Matrix. The originator of this priorities chart, David Loeper, explains it this way to registered advisors:
For each primary goal we want to know if they would compromise other goals. How much in their current lifestyle is early retirement worth? Put a price on it in terms of how much they are willing to save. Focus on each main goal and identify the things they would do to achieve that goal.
And the strength behind this evaluation is Dr. Peikoff’s evaluation of evaluation itself,
Evaluation, though it is essential in every field of cognition, is especially urgent in regard to the man-made. When, through the scrupulous justice of the better men, the good (the mind) wins out, there is virtually no form of ignorance or natural disaster that men cannot successfully combat.
My evaluation is that the life is chaos, markets are inefficient, prices are unjust and just trust us crowd are the malevolent types “who believe that nothing is certain, no one is perfect – just be kind.” But more importantly, I replace them the benevolence of a world that is orderly and knowable.
In other words, the facts are values that lead to cash flow and investment strategy decisions that inspire confidence. To learn more, please click The Moneyball Method.