How to Not Realize the Investment Outcomes You Want…

Listening to intelligent people…

Aren’t we supposed to listen to intelligent people?

While my preference would be to listen to the wise ones, let me clarify what I mean…

Would you ask an engineer for medical advice, however intelligent she or he might be?

Would you ask a surgeon for engineering advice to build a bridge?

I guess you answered ‘No’ to both these questions…but isn’t this what many do when it comes to investing…

For example…wanting to invest just because intelligent people seem to have done it or claim to have found some secret…He has made money trading…well I should do it too…Another example: this PMS Manager knows what he is doing…A lot of intelligent people have given him money…he sounds super intelligent…even if this intelligent fellow knows something the world doesn’t (which I know is not true but we can believe it if you want), what he does might be injurious to your wealth…

Another version of the above point – Listening to intelligent people from the investment profession…

Once again, aren’t you supposed to do this?

Wait until you read the next two paragraphs…

Morgan Housel in one of his podcast episodes said, “An expert in medicine knows all the answers from the textbook…They can diagnose with precision, and they are up to date on all the latest treatments…

An expert in healthcare however is different…He understands that medicine from a patient’s perspective is intimidating, confusing, expensive and time consuming…and nothing you do as a doctor or nothing you prescribe as a doctor, matters until you have addressed this reality with patients because even a perfect solution and the perfect treatment makes no difference to the patient who doesn’t follow it…”

This is true even in the world of personal finance and investing…

You might have the perfect portfolio or the best investment…but none of this will matter if you don’t behave… 

How to Not Realize the Investment Outcomes You Want…

Listening to people who know how to create wealth…but not manage wealth…

Would you ask an entrepreneur who has just exited a business for guidance on how to manage wealth?

The answer to this question is almost certainly a ‘Yes’ for the third one…

It’s because we often confuse making money with managing money…We think people who know how to make wealth for themselves also know how to manage wealth. These are two completely different skill sets and most people who know how to make money don’t have this skill. Because good investing is not about being exactly right, it’s about being less wrong. It’s about not screwing up all the time (This topic is so important that it warrants a separate post).

How to Not Realize the Investment Outcomes You Want…

Not saving enough…

This is one of the most important factors of investing. In fact, savings is the most important factor that you control in creating wealth.

How to Not Realize the Investment Outcomes You Want…

Not getting started… but rather keep searching for the perfect investment…

How to Not Realize the Investment Outcomes You Want…

By practicing naïve diversification instead of finding the right real financial professional to help you in your financial matters.

Some people consider this naïve strategy of giving money to 3 different people smart. I can pick on their brains…but instead what is created is a hodge podge of products, and every other person trying to outsmart the other by taking on more risks.

How many surgeons would you allow to operate on your life or on your brain?

I believe the answer is one, but more importantly the finest caring professional.

The choice of a professional here is not for your portfolio but for your entire financial life.

How to Not Realize the Investment Outcomes You Want…

Not aligning the use of your money with what’s important to you…not understanding the role money plays in your life.

How to Not Realize the Investment Outcomes You Want…

Not knowing how much is enough and keep aiming for more and more…keep moving the goalposts all the time…

How to Not Realize the Investment Outcomes You Want…

Not spending enough…

Although this might not be very intuitive, this is also a problem. Many know to simply save but they are unable to even spend on things that are important and necessary for them.

It’s not simply about being rich…It’s about Living HappyRich.

How to Not Realize the Investment Outcomes You Want…

Read Books…Read this Blog… and Simply Do Nothing.

How to Not Realize the Investment Outcomes You Want…

By chasing investment fads…the hottest investments of the year.

How to Not Realize the Investment Outcomes You Want…

By not beating lifestyle inflation. By not understanding what real capital protection means.

Real Capital Protection is not protection of your principal amount, it is protection of your purchasing power.

How to Not Realize the Investment Outcomes You Want…

By not understanding that volatility in the stock market is normal.

Volatility is the toll or tax that every equity investor must pay. There is no other way because if you suppress volatility, you also suppress returns. It’s as simple as that.

There are many other truths about the stock market, many of which I have been covering in my posts over the last 3.5 years…I guess it’s time to write a post covering many of these truths.

How to Not Realize the Investment Outcomes You Want…

Last but not the least, the most important one…

By interrupting compounding all the time…and/or not letting compounding to work for you.

The reasons could be any of the following…booking profits, buying real estate, rebalancing, market timing, selection of products, investing in a better investment.

We keep interrupting compounding all the time, and this is the second biggest mistake in investing.