Investing Lessons from the Happiest Place on Earth

Investing Lessons from the Happiest Place on Earth


Having survived a week-long road trip to Disneyland a few weeks ago with my two young kids—ages “almost six” and “four and a half” officially—I want to share my wisdom and experience—not about how to conquer all of the rides in both of the resort’s theme parks in two and a half days (maybe next quarter’s article), but rather the important investing lessons that came to mind as we passed the time in many endless lines.

Manage Your Mood

The most striking thing about Disneyland is that it is literally the happiest place on earth. Everyone is in a great mood all the time—the guests, the employees, the shuttle bus drivers, the restaurant and hotel employees outside the park. It is infectious. While I do not consider crowded theme parks, long waits, and thousands of young children parts of a relaxing vacation, it was actually therapeutic to be forced into such a positive state of mind for a few days.

As an investor, it can be easy to get caught up in the negative news cycle and maintain a steadily pessimistic outlook as a result. Wall Street climbs a wall of worry as they have been saying for a long time. It certainly does not make sense to always maintain an optimistic attitude in regard to the financial markets; that would be Pollyanna-ish and worthy of Fantasyland. However, it is important to be aware of your mood when making financial choices. If you find that your mental state is in a place that is often overwhelmingly negative (or positive), you may be letting your emotional bias influence your investment decisions, which is never a good thing.

The Future Does Not Follow a Linear Path

Within the walls of Disneyland, little changes. This trip marked the first time in 15 years that I visited the park, but it was exactly as I remembered it. I remembered where everything was without the aid of a map, and even that ice cream shop where I enjoyed a banana split at age six was still there serving banana splits. When we make a return trip with the kids in a few years, I am certain everything will be almost exactly as it is today (except the prices, as even Disneyland is not immune to dollar debasement).

While life in Disneyland is steady, predictable, and unchanging, the same cannot be said for the outside world. However, investors often diagnose long-term risks by incorrectly assuming that the future unfolds in the same linear fashion as it does at Disneyland. For example, in working with clients on retirement planning, Social Security often comes up as a major concern. Should we count on full benefits when the latest annual report from the program’s trustees projects that the trust fund will be unable to pay full benefits as soon as 2033? That is just 21 years from now and is the shortest period to an anticipated benefit cut since 1983. Regardless, we advise that our clients rely on their full level of benefits not because we question the report’s conclusion, but rather because things change. That 1983 date is significant because it represents the last time that major adjustments were made to fix Social Security, and we are certain that adjustments will be made before 2033 to fix it again.

Whether you are contemplating the risks of Social Security to your retirement plan or the European debt crisis to your portfolio or global warming to your planet, understand that the perceived risks are mitigated to a degree because of human response and adaptation. So the next time you are cautioned of impending doom “if nothing changes,” you can safely conclude that the assumption of a linear future that underlies those warnings is unrealistic in the world outside of Disneyland.

Life Goes On

Like I mentioned at the outset of this article, we managed to do all the rides at Disneyland—yes, even It’s a Small World despite my better judgment. The repetitively annoying song plays during your entire wait in line and throughout the ride. In fact, somewhere between Germany and Sweden, it dawned on me that the song has been on a constant loop since the last time I visited 15 years ago and long before that. Much has happened in the world since this ride first opened in 1966, but those dolls just keep singing that disgustingly cheery song.

This realization reminded me of a chart that is sent to us periodically by American Funds. It is a standard graph of the performance of the Dow Jones Industrial Average since the early 20th century. The only difference between it and your run-of-the-mill stock chart is that they have included every major event—both world and financial—during that near 100-year period. The lesson is simple: lots of things both good and bad have occurred over the years, and yet businesses, and hence the stock market, continue forward. It’s a resilient world after all.

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