Before my career in finance, I spent most of my life as a musician. I started piano at 6 or 7 years old, working my way through beginner books before moving on to a more serious classical repertoire. In my early teen years, I took interest in Jazz and Pop music. In high school, I started to actually get paid to play piano with some friends at restaurants and weddings. Getting paid to play piano seemed too good to be true so I kept pursuing music in college. At that point, I dedicated my studies to jazz music – the art of improvising and composing music made completely in the spur of the moment.
I did freelance work for several years before moving into music ministry at churches. I became a “chameleon” in musical terms – I was comfortable in any setting. Need some improvised jazz music? I’ve got you covered. Need me to play Mendelssohn’s Wedding March on the organ? I’ve got you covered there, too. Looking for light classical background music? I can do that as well.
I was comfortable performing in any musical setting because I put in a lot of hard work over decades. I devoted all of my time and energy to learning about different styles of music, listening to recordings, and practicing 6-8 hours a day during college.
After some success as a musician, I wanted a career with more stability, so I went back to school to earn my MBA. I always enjoyed the business side of working as a musician and wanted to be equipped to move into the (non-music) business world. While pursuing my MBA, I found that I most enjoyed financial analysis and accounting, which eventually led me to Franklin Wealth. I am confident that the skills I developed as a musician have helped me here at FWM.
My wife, who is a Professor of Piano at UTC, has been preparing for a recital that she has coming up in a few months and it’s had me thinking about the similarities between preparing for a recital and investing.
Behind the Scenes
Many of us have had the experience of attending a concert and enjoying the performance on stage. This is the finished product of long hours of work before the artist is ready for “showtime.” I know many of you have been to countless piano or band recitals by children and grandchildren. And many of you know through first- and second-hand experience that an immense amount of work goes into preparing for a musical performance.
Pianists like my wife and I spend years practicing scales and arpeggios, analyzing harmony, reading about composers, and listening to dozens of recordings just to build the foundation for a successful performance! When working on a specific piece of music, we spend months “drilling” difficult passages, memorizing each measure, and performing the piece for teachers, mentors, family, and friends before actually performing the piece for a public audience. My wife often practices entire pieces playing only one hand at a time, jumping to random spots in the piece to test her memory, or playing the piece at half speed or double speed to test her technique.
This is just some of the work for what could end up being a 5-minute performance! A musician must do the “dirty work” behind the scenes for the performance to be successful.
Investing is similar in that we draw upon years of experience, hard work, and data – we do the dirty work behind the scenes – to select the right company that might be successful. Before we invest in a company, we dig through balance sheets, cash flow statements, and quarterly and yearly reports. We analyze the data using different ratios and read other analysts’ reports. We read the manager’s comments in annual reports, get to know the company’s competitors, read about the executive team’s successes and failures, and bounce our ideas off colleagues at FWM. We do all this research or “dirty work” like the pianist by perfecting our technique through practice and our ability to perform well.
Choosing the Best Match
After all this practice, sometimes the musician finds that a piece they are working on is just not the right “fit” for performance. This could be for many reasons – it’s too flashy or not flashy enough, too short or too long, in a style that we aren’t comfortable with, or doesn’t fit well with the other pieces we are playing in a performance. Sometimes we discover this early on and save some hours of practice, but sometimes we don’t come to this conclusion until the concert is near and we must change direction quickly.
We run into this as investors, too. The companies may not be in an industry we’re comfortable with, or maybe we already own another similar company so it’s not a good match for the portfolio. The beauty of both researching stocks and practicing music is that we don’t have to buy (or perform) any of them. We can let many investment opportunities pass us by without “biting,” and having the discipline to let investments pass you by is often the marker of a good long-term investor.
If we do research and analysis of 100 companies, we might find 2 or 3 that we really like and end up investing with them. As investing legend Charlie Munger once put it, “It takes character to sit with all that cash and to do nothing. I didn’t get to where I am by going after mediocre opportunities.”
Finding great companies vs. momentum investing
In the past few years, investors have been following trends blindly. Retail trading has skyrocketed, investors are taking on more and more risk and the common narrative is that the market will always go up. Many investors consider social media trends as beneficial. Unfortunately, they invest all of their money on these trends without knowing anything about the company! However, while these high-priced sexy investments sometimes perform well in the immediate term, they almost always lose money in the medium- to long-term.
Fortunately, at FWM our investment philosophy is not centered around blindly following trends. However, we don’t balk at trend-following completely. Since the market moves in cycles and due to the careful research, we may follow sectors that tend to perform well given the current cycle. Even as we follow these trends, we are always looking for value. We like to find great companies, wait for them to go on sale, and invest in them when the greater market trend is in their favor.
Our Team is Working for You
Just like in music performance, we can’t guarantee that every selection will “knock your socks off”. What we can guarantee is that we are committed to the behind-the-scenes work. Like the master musician who patiently practices for hours before a performance, we are committed to putting in the work to give our clients the best possible shot at success. We patiently listen to the music of the markets so that you can be confident we are always looking out for the best interest of our clients.
As a Wealth Plan Analyst, Patrick is dedicated to the analysis of client portfolios and their underlying securities as well as research and analysis of the broader market and economic trends to best serve our clients’ needs. Patrick also provides support in preparing financial plans, meeting with clients, and assisting with various back-office and technology support.
Joe D. Franklin, CFP is Founder and President of Franklin Wealth Management, and CEO of Innovative Advisory Partners, a registered investment advisory firm in Hixson, Tennessee. A 20+year industry veteran, he contributes guest articles for Money Magazine and authors the Franklin Backstage Pass blog. Joe has also been featured in the Wall Street Journal, Kiplinger’s Magazine, USA Today and other publications.
Important Disclosure Information for the “Backstage Pass” Blog
Please remember that past performance may not be indicative of future results. Indexes are unmanaged and cannot be invested into directly. Index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investments. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Franklin Wealth Management), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Franklin Wealth Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Franklin Wealth Management is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Franklin Wealth Management’s current written disclosure statement discussing our advisory services and fees is available for review upon request
