Investing In The Good Life

No man is a failure who has friends.

Every year around Christmastime, my family watches the classic film, It’s A Wonderful Life.

Most of us cry at the ending every year. I cannot recall a time in my life that I have ever cried tears of joy, rather than sadness, except when watching this movie.

In the film, George Bailey starts as a bright and ambitious young man who absolutely does not want to take over his father’s savings & loan business. He wants to go to college (much rarer in those days), travel the world, and become an architect who designs skyscrapers. Also, he doesn’t want to get married, because that would just get in the way of his goals.

If you’ve seen the film (and if you haven’t, don’t blame me for the spoilers, because it’s been out since 1946; you’ve had your chance!), you know George Bailey never achieves his dreams. He never goes to college or travels the world or becomes a famous architect. And he does get married to his high school sweetheart.

Time after time, circumstances arise that force George to choose between selfishly pursuing his dreams and fulfilling his obligations to those who depend on him.

Time after time, he chooses the unselfish route, putting others’ needs over his own. He takes over his father’s savings & loan business, he gives borrowers grace when they can’t make their payments, he personally provides for those who need help, he takes care of his family and children, who love him dearly.

At one point in the film, a substantial sum of money goes missing, and George falls into a deep depression, feeling himself a total failure.

But word spreads around town that George is in trouble and needs money, and everyone who George has ever helped or befriended comes together to provide for him in his time of need. In fact, they provide far more cash than even the substantial sum that went missing.

George’s guardian angel, Clarence, delivers a note to him at the end that reads: “No man is a failure who has friends.”

I get choked up even writing those words because of their emotional resonance in the movie.

We all want the good life, the “wonderful life,” if you will. But we all tend to be lured into the trap of believing that the good life is tantamount to extrinsic, individualistic achievements — riches, fame, beauty, social media following, world travel.

There are momentary pleasures to be gained from these, to be sure. But a vast and growing body of scientific research bolsters the timeless wisdom found in It’s A Wonderful Life and elsewhere that the “good life” does not derive in the least from these extrinsic achievements.

That might seem like an odd thesis to espouse on platform devoted to the pursuit of alpha. But moneymaking and investing prowess aren’t mutually exclusive with the good life. They can be, but they can also facilitate living the good life.

In what follows, I’ll discuss the elements of the good life along with some of the research backing each. Afterward, I’ll explore how investing can be a tool to facilitate and enable the good life.

Elements of the Good Life

We all share the unconscious belief that some extrinsic, material things will make us happy.

• That new house or car.
• Reaching 7 digits in your retirement account.
• Vacationing in Fiji or France.
• Amassing a huge following of social media devotees.
• Receiving frequent compliments on your beauty or physique.
• Eating at all the fanciest restaurants.
• Getting that promotion or finishing first in your age group in the marathon race.

Whatever it is, the allure is obvious, but actually attaining it leads only to a temporary feeling of pleasure and accomplishment. It quickly becomes the “new normal.”

This is because of the psychological phenomenon known as “hedonic adaptation.”

Our brains are wired to deliver a dopamine hit from things that promote survival and procreation, like eating calory-rich foods and having sex. These activities and achievements feel good in the moment, but then we recede from those highs back to our emotional baseline. And if we try to repeat this dopamine hit over and over again, our brains will adapt to this new default and cease producing the good feelings.

A 2010 study published in the Journal of Personality found that people tend to significantly overestimate the well-being benefits from attaining extrinsic goals related to money, fame, and image, whereas intrinsic attainment related to personal growth, intimacy, and community involvement came with huge emotional benefits and strongly correlated with lasting happiness.

In other words, those who deliberately pursue the elements of “the good life” raise their baseline level of happiness, contentment, and joy. They are simply happier and more fulfilled people.

Meanwhile, those who primarily orient their lives around attainment of extrinsic goals to the detriment of the “good life” end up with a low baseline of happiness, even if some experiences or attainments still deliver fleeting moments of pleasure.

Okay, so what are the elements of the good life?

The foundation of my thinking on this subject comes from Dan Buettner’s investigation of the world’s Blue Zones — subcultures around the world where people live disproportionately long, healthy, and satisfying lives. Places like Okinawa, Japan and Sardinia, Italy.

While Buettner’s findings spurred me onto my own research into a universally applicable formula for “the good life,” I ended up with a slightly different framework.

Based on my survey of the scientific literature, the good life concerns how we Commune, Consume, Contribute, and Cultivate.

Click to enlarge

Let’s go over each of these elements of the good life.

Since humans are inherently social creatures, it shouldn’t be surprising that the foundation of the optimally satisfying and fulfilling life is strong relationships.

The recently released book The Good Life, authored by the directors of the longest running scientific study on happiness (84 years and counting), demonstrates this by looking at several longitudinal studies covering thousands of people across the globe over the course of their lives.

Their central finding: “Good relationships keep us healthier and happier. Period.”

Long-Term Companionship

Companionship refers to those indefinite, interconnected, life-sharing type of relationships like marriage and very close friendships. People in these relationships not only enjoy each other’s presence when times are good but also rely on and find comfort in each other when times are bad.

Of course, marriages can become loveless, and close friendships can have rifts. But strong, close companionships have tremendous beneficial effects on both one’s mental and physical health.

Most of the time, companionship comes in the form of marriage, but it could also be a close friendship or partnership. For example, as I explained in “Dividend Investing Like Charlie Munger,” the companionship between Munger and Warren Buffett certainly appeared to be a highly meaningful and fulfilling one for them both.

Investing in companionship produces perhaps the greatest ROI of any human activity.

Fellowship

Fellowship refers to the more casual relationships in life such as friendships built on a shared interest or hobby, work colleagues, church small group members, fellow parents at the Little League game, mentors, and so on.

Social connectedness promotes a feeling of being seen, of belonging. The draw of the popular 1980s TV show “Cheers” wasn’t just its humor. It was the fact that this bar was a place “where everybody knows your name.”

Even these more casual relationships, to the degree that they are positive, have profound protective effects against loneliness and isolation.

In May 2023, the US Surgeon General put out a statement raising the alarm about the “epidemic of loneliness and isolation in the United States.”

The physical health consequences of poor or insufficient connection include a 29% increased risk of heart disease, a 32% increased risk of stroke, and a 50% increased risk of developing dementia for older adults. Additionally, lacking social connection increases risk of premature death by more than 60%.

The authors of The Good Life found the same thing in their survey of various longitudinal studies: “[A]cross all age groups, genders, and ethnicities, strong social connections were associated with increased odds of living longer” (pg. 47).

Healthy Diet

While there is debate among nutritionists about the “optimal” diet, there is also broad agreement that a healthy diet includes much more vegetables, fruits, whole grains, leafy greens, and legumes than the standard American diet.

The physical health benefits of eating healthier are well known. But most people think that there will be a trade-off between their physical health and enjoyment of food by eating healthier, because unhealthy foods just taste better!

In the short term, it is true that switching from unhealthy foods to healthy ones is hard. But taste buds adjust. After eating healthy for a while, unhealthy foods you used to enjoy simply don’t have the same draw anymore. Cravings fade.

And best of all, eating healthier has tremendous beneficial effects on both your physical and mental health. Eating healthy:

• Reduces mood swings and improves focus (source)
• Reduces anxiety (source)
• Reduces stress (source)
• Staves off depression (source)
• Helps prevent and lessen the effects of dementia (source)
• Promotes happiness (source)

What good is all the money in the world if you don’t have good health?

Lifelong Learning

Knowledge is power, and you can never have too much power.

The beneficial effects of lifelong learning have been demonstrated numerous times. For example, this 2018 study of older adults found that “continuous participation in non-formal lifelong learning… is independently and positively associated with their psychological wellbeing.”

Although continuous learning is mostly discussed in relation to older adults, it is applicable to all ages. The typically poor outcomes of high school dropouts is illustrative of this.

A 2012 study titled “Benefits of Lifelong Learning” highlight three broad benefits applicable to all or most ages:

1. Coping with an ever-changing world
2. More job opportunities and higher income
3. Making one feel enriched and fulfilled in their knowledge base

Living is learning.

I think that a life properly lived is just learn, learn, learn all the time. –Charlie Munger

Time In Nature

Are trees part of the good life?

My own experience says yes. Every summer for the past 7 years, I have spent at least a week hiking in the Rocky Mountains. Every time, it produces a powerful feeling of rejuvenation and refreshment. It provides mental rest and gives me a renewed outlook on life.

Something about time in nature is profoundly restorative for me.

I’m apparently not the only one who feels this way.

A 2008 study on the cognitive benefits of spending time in nature found that taking a walk through the woods is mentally restorative because it allows the mind to relax and wander. A walk through an urban environment, however, is not restorative, because the mind remains engaged in the constant flow of stimuli, such as fast-moving cars and crosswalk lights.

A 2022 meta-analysis of studies found that walking through nature has potent beneficial effects on mental health, such as reducing depression and anxiety.

Another recent study found that vising nature 3-4 times per week tends to lessen needs for certain medications like blood pressure pills and antidepressants.

Time in nature has also been shown to enhance memory and focus, incite creativity and imagination, and even improve children’s performance in school.

According to a 2012 Canadian study, people who live in or adjacent to green spaces tend to be happier and have higher life satisfaction than those in urban areas with the same sized houses.

All nature is doing her best each moment to make us well — she exists for no other end. Do not resist her.–Henry David Thoreau

Meaningful Work

We all know that work is necessary to live. Someone has to earn a paycheck. Someone has to cook dinner. Someone has to raise the kids.

But we also know that some work is meaningful and fulfilling, while other work is pure drudgery. What’s the difference between the two?

Naturally, there is a significant degree of subjectivity here. Fulfilling work for one person may be drudgery for another. But the core of meaningful work is simply producing something or performing a service that is personally significant, feels worthwhile, and adds value to others.

Research published in 2023 shows that meaningful work produces positive effects on both mental and physical health, providing individuals a general life satisfaction as well as a sense of purpose and drive.

You will get all you want in life, if you help enough other people get what they want.–Zig Ziglar

By the way, meaningful work does not have to be paid. Raising children, for example, is tremendously valuable and meaningful work that is also unpaid. Volunteering for a local charity or church can also be meaningful work.

Generosity

There are wonderful psychological and even physical health benefits to be gained from the act of giving to others, expecting nothing in return. It instills in the giver a deeper social connectedness and a sense of participation in making the world a better place.

The joy of giving a gift, however big or small, tends to germinate into a broader and longer lasting feeling of happiness and life satisfaction, according to psychiatrist Kelli Harding.

Likewise, charitable giving tends to produce a light and buoyant feeling sometimes called the “helper’s high” or the “giver’s glow.” Brain scans show that giving to others activates the mesolimbic pathway, which releases dopamine that produces a happy, elevated sensation. Giving also subtly boosts our own self-esteem and self-worth while combating depression and anxiety, which in turn increases life satisfaction.

Study after study (see this UC Berkely white paper) show that spending money on or for the benefit of others produces significantly greater happiness than spending money on oneself.

People believe that they will derive more happiness from spending on themselves and that sacrificially giving to others will be emotionally painful, but nearly the opposite tends to be true. In fact, one study found that the happiness derived from regularly giving to charity was equal to the level of happiness gained from a doubling of household income.

It is one of the most beautiful compensations of this life that no man can sincerely try to help another without helping himself. –Ralph Waldo Emerson

The research does not seem to show any minimum absolute dollar amount to enjoy the benefits of giving. Lower-income individuals can still benefit even with smaller donations. The important thing is that one consciously chooses to give money to others that could have been spent on oneself (or invested in one’s brokerage account).

Physical Exercise

The tremendous benefits of physical exercise are hopefully so well-known as to make belaboring this element of the good life unnecessary.

Dan Buettner found that in every blue zone he studied, consistent and natural movement continued well into old age for those who lived the longest and healthiest lives. Walking around town, gardening, woodworking, and doing stretches or yoga in the park are regular parts of one’s routine in blue zones. They definitely don’t live sedentary lifestyles.

Exercise not only has benefits on one’s physical health, it also benefits mental health by reducing stress, blunting anxiety and depression, and aiding sleep.

Exercise also increases longevity. One recent, massive study showed that those who get 300-600 minutes (5-10 hours) of moderate-intensity exercise per week are 26-31% less likely to die of any cause and 28-38% less likely to die of cardiovascular disease (the leading cause of death in the US). Moderate-intensity exercise would include a brisk walk, weightlifting, lawnmowing, dancing, playing tennis or pickleball, etc.

Personal & Authentic Spirituality

This one may seem controversial, but it is not controversial in the field of psychology.

There is a mountain of studies showing a range of mental health benefits gained from a personal and authentic spirituality. Spirituality tends to reduce antisocial behavior, anxiety, depression, stress, eating disorders, addiction, and suicide. Columbia University’s Lisa Miller asserts that those with a strong spiritual life are 80% less likely to become addicted to drugs or alcohol.

Spirituality also provides meaning to a host of challenges and painful circumstances in life, and it exerts a powerful preventive effect on feelings of insignificance, worthlessness, and hopelessness.

If you add religious affiliation to the mental/psychological benefits of spirituality, you also get a number of benefits we’ve previously covered: social connectedness, lifelong learning, generosity and other elements of the good life. All of these compound on each other in people who are both spiritual and religious.

That’s why psychologist Andy Tix cautions against the trend of dispensing with religion entirely in favor of an irreligious spirituality. The “spiritual but not religious” crowd don’t get the full benefits that religious people do.

Perhaps this helps to explain Pew Research’s data showing that religiously active people in the vast majority of countries surveyed report being happier than irreligious people.

Increased happiness might help explain the finding that those who attend religious services regularly tend to live longer and have a 40% lower mortality rate on any given year.

The benefits of spirituality and religiosity seem to transcend culture and geography. Notably, all of the blue zones Buettner studied have deeply religious cultures, but the particular religions are very different.

I don’t think this necessarily indicates that all religious/spiritual beliefs are equally valid, but rather that spirituality is a natural expression of humanity.

For the irreligious out there, the atheist Sam Harris wrote a book called Waking Up: A Guide To Spirituality Without Religion in which he seeks to tap into the benefits of spirituality without any supernatural religious beliefs.

Gratitude

Finally, gratitude is a major yet perhaps underappreciated (pardon the pun) part of the good life. I saved this element for last because gratefulness seems to be the magic pixie dust that can be sprinkled on any area of life to improve it.

This June 2023 New York Times article on the science of gratitude is a great intro, and I’m grateful for Christina Caron for writing it (see what I did there?).

Gratefulness strengthens relationships, alleviates mental health issues, improves sleep, and may even lower blood pressure. It also reduces negative feelings like envy, resentment, and regret.

An article in Psychology Today also mentions that gratitude reduces social comparisons, helps people overcome traumatic experiences, and makes one more winsome to others, opening the door to turning acquaintances into friends.

Gratitude is the healthiest of all human emotions. The more you express gratitude for what you have, the more likely you will have even more to express gratitude for.–Zig Ziglar

This Investor’s Takeaway

How is an investor to respond to these elements of the good life?

I can only say how this investor (yours truly) responds.

In the introduction, I mentioned that good investing can be mutually exclusive with the good life, but it can also facilitate it. My own experience attests to the fact that investing can become too big and crowd out the various elements of the good life.

Several years ago, I owned nearly 100 stocks, compulsively researched various aspects of the market, and was an aggressive saver. I’m still a natural saver, but not like I was then. Anyone who knew me well would probably describe me as stingy. I wanted every penny not spent on keeping myself, my wife, and our dogs alive to be allocated to more shares of stock.

Unfortunately, I was as stingy with my time as my money. After all, I owned almost 100 stocks and had a watchlist on top of that! I always had something to research, something to read, some new data to absorb to perhaps give me an edge in knowing what to buy next or what I might sell.

My marriage suffered from this stinginess, and despite my brokerage account value swelling mightily, my happiness, self-confidence, and gratefulness waned.

Today, after a few painful years, my wife and I are much happier together, I believe I’ve become more generous with my time and money, and gratitude comes easier for me.

This progress had many contributors, but when it comes to investments, the primary changes were:

• Roughly halve my number of individual holdings.
• Focus primarily on my sphere of competence.
• Focus on quality and conservatism, seeking to own only the best-in-class or industry-leading names.
• Rely more heavily on low-cost, passive ETFs like the Schwab US Dividend Equity ETF (SCHD) that screen for high-quality, large-cap, dividend growth stocks that make good long-term holds.
• Double down on a long-term buy-and-hold strategy that diminishes trading activity.

In short, I’ve learned to organize my portfolio so as not to allow it to crowd out crucial elements of the good life.

Whereas I might be able to find other dividend-paying stocks that are cheaper or higher yielding or with greater upside potential, I’ve found that those low-risk, steady compounders are ideal for me.

That’s why, over time, my portfolio is becoming more heavily tilted toward names like Agree Realty Corporation (ADC), a net lease REIT that owns single-tenant retail properties leased overwhelmingly to the largest and strongest retailers in the nation.

Could I find a cheaper and higher-yielding net lease REIT with higher upside? Sure. Compare ADC’s 4.7% yield to Realty Income’s (O) 5.4%. But, in my view, O has gotten too big for its own good and is extending itself well outside its sphere of competence, while ADC’s portfolio has only gotten stronger and higher-quality in recent years.

Much the same could be said about my second largest holding (after my largest, ADC), Enterprise Products Partners (EPD). There are cheaper and higher-yielding alternatives to EPD in the midstream energy space, but none, I would argue, as high-quality or conservatively managed as EPD.

Roughly 1/3rd of EPD is insider-owned, management has a long and uninterrupted record of generating double-digit returns on invested capital, and EPD boasts the second longest dividend growth track record in the North American midstream space at 24 years — behind only Enbridge (ENB) with its 27-year track record.

While I still keep up with these low-risk compounders quarterly, they’re low-maintenance, sleep-well-at-night investments that free up my time to focus on the things that make life sweet.

That, to my mind, is the way to make investing a tool to facilitate and enable the good life.

1. Make lots of money.
2. Use that money to free up your time.
3. Use your time and money to invest in the good life.

There’s the formula for you. Oversimplified, perhaps, but not unachievable.

Onward

Another year is behind us. Another year ahead. Let us learn from our mistakes and apply the wisdom gained to investing and to life.

Merry Christmas, Happy New Year, and may we all enjoy more of the good life in 2024!