Is Your Money Your Honey?
In many ways, searching for the perfect investment is like searching for the ideal relationship. Many of us begin with the “Blind Date” investment. You know, the one that your friends are so anxious to hook you up with because they are perfect and just your type! Then some of us have the “On Again/Off Again” investment, where one day we are up, but the very next day we are losing. Often, we stay in this relationship because we don’t know that there is anything less volatile that may be better suited to our temperament. And then there’s the “Steady Eddie/Edie,” the nice guy/gal who you can count on in times of trouble or volatility. The nice guys of investments would be Annuities, Bonds, Dividend Paying Stocks, Gold, Silver, and Precious Metals. If we are really honest with ourselves, at some time or other in our lives, we may have been drawn to the “Bad Boy” or “Dangerous Diva” fling, the investment equivalent of Oil & Gas, Diamond Mines, Penny Stocks or High-risk Auto Loans. The promise of high returns seduced us away from the safety and security of boring old “Steady Eddie.” We knew they were not long-term relationship material, but we couldn’t resist. The result of a fallout from the Bad Boy or Dangerous Diva can sometimes push us to settle with a “Couch Potato.” The Couch Potato investment sits around on its lazy assets all day long, doing very little for you. Sure, you know it will be there when you come home, but it will never help you accomplish what you need in your financial house! Examples of Couch Potato investments include money market accounts or CDs (otherwise known as “Certificates of Deposits,” or as I’ve heard them called “Certificates of Disappointment”!).
What we are really trying to find is our soul mate investment portfolio. The truth is, that like our real-life soul mates, our investment portfolio should have a bit of all of these characteristics in them. What makes them perfect is how they balance and match what we want depending on our values, temperament, goals and objectives!
Take eHarmony, for example. They claim to have the highest number of marriages resulting from their eHarmony program. We are inclined to believe this since we are one of their success stories. That’s right, we’re a husband-wife team that’s been in business together for over nine years, and we met because eHarmony matched our values, goals, and objectives. We, therefore, know the time and reflection that went into carefully completing eHarmony’s questionnaire and how it contributed to our success as a couple. When you sign up with eHarmony, you are required to take a version of the Myers-Briggs Type Indicator (MBTI)[1], which assesses how you perceive the world and how you make decisions—your values. In addition, eHarmony asks a number of other questions pertaining to lifestyle, religious preference, children, and other beliefs and goals. Once completed, your data is used to “match” you to another person with similar values and goals. Our retirement planning process has a similar assessment, which helps to identify where you are as an individual and couple with your financial temperament so we can present opportunities that fulfill your values and goals.
Most people never stop to think about their investment vehicles as an extension of their values, goals, and objectives. We’ve come to understand that this is why there is so much anxiety around investing. In our experience, most people are unaware of how their investment “works,” if it’s working for them, and what fees and more importantly the tax implications that exist.
If this is true for you, don’t be too hard on yourself. After all, where would you have learned this information? Certainly, it’s not taught in our school systems. And most financial advisors, while well-intentioned, do not have the time to give a crash course on the details of every strategy they recommend. Our RISA (Retirement Income Style Awareness) assessment reveals your “money rules” or the emotion that drives your financial decisions.
Most successful people have money rules, whether they call them money rules or not. You may have strict criteria on what you will and will not invest in, whether you want to actively manage an investment or passively invest, the liquidity of the investment, what kind of returns you are expecting, tax implications, and, most importantly, an exit strategy. The reason most people lose money in the stock market is because there is no exit strategy. Fear and losing money are bad exit strategies! When your money rules are in alignment with your values, goals, and objectives, money flows. When they don’t match your values, goals, and objectives, they cause anxiety.
Google makes it possible to have anything we want delivered to our fingertips. One word of caution, however: When you research online, be sure you understand the source and motives of the individual or company providing an opinion. Are they a competitor? You wouldn’t expect a Mercedes dealer to sing the praises of Lexus! Are they influencers? Many times, you have investors who deliberately put out questionable information in an attempt to influence a company’s stock price. They may hold positions such as “short” or “long” that would benefit from certain movements in the stock price. Their opinions may be biased, and they might have ulterior motives. This kind of manipulation tends to work on small to mid-size companies because it is fairly easy to have an immediate effect on their stock’s price. You are less likely to see this with large companies like GE and Proctor & Gamble.
The process of due diligence can take some time, but it should not be avoided or assumed. What I mean by “assumed” is this: Just because an advisor/large firm recommends an investment, it does not mean it is necessarily a sound one FOR YOU.
Another area of consideration in the “romance” of your investment is your choice of advisor(s). Did you ever hear the saying, “When you marry someone, you marry their family”? Well, investing is no different. Choose a team that has the credentials you need for any particular asset class. Hear me loud and clear: Advisors are biased—all of us. We are biased toward the strategies that our licenses allow us to offer you, the investor! Even “fee-only” planners have biases. This is exactly why you may need to have several advisors with specialties in the asset classes YOU choose. Your relationship with your investments is equally important as your relationship with your spouse, boyfriend/girlfriend, family, and friends. It deserves the same care and attention you would extend to those you care about. This is why YOU must LEAD your wealth team!
Notes
1. The Myers-Briggs Type Indicator (MBTI) assessment is a psychometric questionnaire designed to measure psychological preferences in how people perceive the world and make decisions.
