Trust The Process

By: Richard A. Anderson

I am not a fan of basketball, but one story this year caught my attention. The Philadelphia 76ers, who were far and away the worst team in the National Basketball Association over the past few seasons, surprised many fans and basketball insiders alike when they won 52 games en route to the number 3 seed in the Eastern Conference playoffs. For the 76ers players and fans, the mantra “trust the process” served as a rallying cry for the team throughout the season and into the playoffs.

The process the team and fans trusted over the last few seasons was one that involved losing games on purpose in the short-term in hopes that it would pay dividends in the long-term. In many respects, it was a philosophy of losing battles to win the war. The organization’s premise was that if they lost enough, they would earn the top pick in the draft. By securing the top pick, they hoped to draft a young player who could carry the franchise on their back to long-term success.

While this isn’t a revolutionary approach, what makes the Philadelphia 76ers standout is that they were patient enough to actually stick with the process. In most instances, teams will feel the pressure from their fans to win games and change their approach. They will fire their coach or trade for a player who doesn’t fit the long-term vision, hoping for a short-term fix. But these short-term fixes tend to be road blocks to success because they extend the time it takes to reach the end result. The New York Knicks are one of many teams that fit this description.

The 76ers, by trusting the process, sacrificed victories in the short-term for success in the long-term. In many ways, there is a parallel to be drawn here between sports and investing.

It can be difficult to “trust the process” when your portfolio is not meeting your return expectations. In order for you to stick with your investment choices over the long-term and through changing market conditions, you must have confidence that you are making good decisions. This confidence can waver during periods of underperformance, which can lead to you abandoning a sound investment strategy designed to provide long-term investment success for a quick fix. While this may provide comfort in the short-term, it can lead to worse investment outcomes in the long-term. This is often referred to as the “behavior gap,” which is a measure of negative impact of poor decisions made by investors by chasing past performance.

You place your trust in our ability to exercise good judgment when building an investment allocation to meet your long-term financial planning goals. We work hard to earn and preserve that trust by constructing portfolios based on solid economic rationale and an evidence-based approach. We believe this trust helps you be better prepared to withstand periods of underperformance and is the key for developing the discipline needed to realize better investment outcomes.