“If you have ever wondered how it feels to be a financial advisor or wealth manager…this about sums up my last 12 years.”
The following is an article from a US investment adviser.
NEW CLIENT (NC): “I’m excited to have my money make more money than just sitting in the bank”
FINANCIAL ADVISOR (FA): “Great. The most important thing is to be long term, patient and disciplined. Don’t let your emotions get the best of you because we can’t control what the market does in the short term.”
NC: “Got it. I’m definitely long term and not afraid of risk.”
FA: 🤨…”That being said, the best way to protect your money while growing it is to spread it so much that basically the only way you can lose all of your money forever is if all the 1,000+ companies you own in your portfolio go away…and if that happens we have a way bigger problem than losing our investments.”
NC: “Got it diversification keeps my money protected long term.”
FA: “Just like no one believes fortune teller can tell the future, no one can predict when to be in or out of the market and you don’t have to make money. There’s no money made without riding out the hard times when it’s not fun to be in the markets. Actually the big money is made by buying stocks from scared investors by being an aggressive buyer when others are fearful.”
NC: “Right…I’m not a afraid of volatility (when the markets going down violently). You won’t hear from me. I’ll probably forget to even look at it 😀.”
….4 months later when the market goes down the normal discussed percentage to expect in a correction
NC: “OMG….what’s going on with the market 😱… should we move our money out until it’s safe 😱😱😱?”
Financial advisor: 😐…(Thoughts to self: “Are you (explicitive) kidding me?” 🤦🏾♂️)….but he/she knows this is when we really earn our money. Keeping our clients from blowing up a well designed investment plan 🤷🏾♂️
The US adviser who posted this story was Phillip Washington Jr.
CEO of Stone Hill Wealth Management
Why is this interesting? There are so many issues that can be discussed. In fact, someone could write not just a book, but a trilogy!
When stock markets fall/crash, the media will print and report “Millions in a flight to bonds”. Investors say they understand volatility, but when it happens, their actions change. Why is that? It is simply emotionally overwhelming and applying logic when friends, family, and the media are talking about the impact of a crash, it is hard to ‘swim upstream’.
In reality, investors like to invest with big companies, because they feel safe in the crowd. It is easier for investors to rely on the crowd, on the basis everyone can’t be wrong. If your research tells you to swim upstream, you face a challenging time. It’s therefore easier to go with the crowd when investing. Equally, if you are with the crowd as markets rise, you’ll be with the crowd as markets fall. And if the crowd want to sell into bonds, you will follow the crowd. Its easier.
As an investor, if you do not take the time and effort to really think about how you invest, and instead take the easier option of feeling safe in the crowd, you have to accept the flip side.
Investors who understand that to grow and protect wealth requires more effort and will therefore get better outcomes.
You can lie to yourself 1000 times that you can ‘swim upstream’ and are ‘not part of the crowd’, unless you are one of the few who get it.