Global View Investment Blog

Stop Being the Sucker: How to Beat the Big Banks at the Investment Game and Fight Confusopoly

For hundreds of years, Main Street investors have transferred their hard-earned wealth to more savvy investors on Wall Street. Wall Street is deliberately confusing investors for its benefit. Thankfully, recent insight in the field of behavioral psychology provides tools to help investors stop this legal theft. We seek to be investor advocates. So that we can stop this legal theft!

 

Selecting the Right Advisor and Investment Strategy for You: It’s Time to Rethink How You Invest

So many books have been written about investments but they literally all ignore the most important part: The psychology of it. If you are human, then you know that you are bound to make choices that don’t make sense from a purely intellectual perspective. So why do all the books start there?

At Global View, we recognize that you are not only not rational all the time, but that you are literally irrational most of the time. And by recognizing this important fact, we can create a system for overcoming this and lead you to long-term investment success.

It’s time to rethink how you invest. Because, as a successful person, you just aren’t the kind of person who transfers your hard-earned wealth to big banks and insurance companies. And you’re not too stubborn to admit that you can be your own worst enemy.

Let’s get this straight: How to invest hard-won earnings is the most important decision successful people make.

If investing were easy, everyone would get it right. But no one does. Yes, you know how to run your business or career, but investing in securities is different.

Literally all investment books written tell you how to invest without even understanding who you are and what you want. None of them tell you what to expect and what to do when the unexpected happens.

Imagine having a system that will help you expect the unexpected and react appropriately when the unexpected happens.

 

Want to talk to a real fee-only fiduciary who has your best interests at heart? Contact us with any questions or to schedule a complimentary financial review.

 

The Basics

Let me tell you something I have told my family: You are a terrible investor.

Just when you think an investment looks good, it’s probably the wrong time to buy it. And just when you think it looks awful, it’s probably the best time to buy it.

This happens because no one is wired to invest. Your wiring has set you up to run away from “risk” and run toward reward. This helped cavemen. But it’s a terrible way to invest.

Here’s something else I tell people I like: Your enemies know this; the big life insurance firms and banks (with their associated brokerage firms) get it; the best salesmen at these firms understand how to manipulate you. I know this because I have been studying it since I was working on my MBA and my wife worked for compliance at Merrill Lynch in 1993.

And because the firms employing the best salesmen have figured this out, they now employ psychologists who know that you are wired this way, which means they develop investment products to trick you into investing in ways that are good for them but not for you.

Unfortunately, you have been played for a sucker for much of your life and will continue to be until you get it. You need to stop falling victim to this confusopoly.

The reason successful investors do well is they embrace risk. They don’t avoid risk, they embrace it. Without risk, there can be no reward. And any attempt to eliminate risk will result in a transfer of wealth from your loved ones to your enemies. Because your enemies know this.

The trick is to not be blind to risk but to take the right level of risk.

To do well at this, you need more than a goal. Because goals only work for a moment in time. This means you are always working toward something that you only get at a moment in time. If you have a system and follow it regularly, you will always win.

Who doesn’t like winning?

 

You Are a Terrible Investor

Yes, at investing, you are terrible. You might be the greatest at your business and in your profession, a fantastic parent and the world’s fastest marathoner. But you are a terrible investor.

You need to know this.

It is important for you to understand this, in your gut. Because until you do, we can’t fix the problem. And no amount of trading strategies will ever fix this, no matter what the brokerage firms provide in “free trading.”

Because of the impact investing has on the people you care about, how you manage investments is the most important thing you do. This means you must develop a strategy and stick to it, embracing risk, not avoiding it.

Even successful investors leave more than half of their returns on the table because they abandon their long-term strategies.

The most important job of a financial advisor is to develop a system that ensures the strategy you take is one you will stick to! And ignoring your reactions (which are predictable) is the most critical failure point investors make.

As you become more mature and successful, your own needs become less important and the needs of other people become more important. Because we have been doing this for nearly two decade (largely as a team), we have witnessed how our clients’ goals evolve. We recognize how successful clients’ goals shift from themselves to others (such as grandkids and charitable causes).

This means making the right strategic choices is more important than you think. It can also make short-term bumps in the road easier to take, but this takes disciplined education.

 

Here are 3 things to remember when it comes to investing:

 

1. It’s not about you. It’s about your family and legacy.

Because banks, brokerage firms and insurance companies are especially adept at marketing, you must understand the conflicts of interest they are faced with! Only after you know how your “advisors” are compensated can you avoid these conflicts of interest. This confusopoly is so complex that most investors (except Vulcans – I don’t know many) can’t figure it out on their own. And because you are incapable of being rational, you may fall prey to the appealing half-truths they tell you, which means you might not be able to do this on your own. I want to help you learn how to create a system to avoid conflicts of interest, whether you do it on your own or not.

 

2. There is one best way (for you) to invest.

The best way for you to invest is the strategy that works for you that you can stick with and that has the highest odds of attaining your goals. Because everyone has a different attitude toward risk, you need a valid assessment of your attitude toward risk. And then you need to understand and prepare for expected volatility. Moreover, the effect of volatility on your investments will differ depending on how serious your money is to you. Of course, all money is serious, but it becomes more so as you near retirement.

 

3. Embracing your humanity and making the right life choices is essential to surviving volatility.

You are a human being, not a “rational actor.” Eliminating the worries that plague you will allow you to follow the system. The decision you make regarding whether to take debt, whether to have a second home, when to retire and even where to live depend on how you feel, not what you think. Only after you begin to feel like you are free of worry can you truly have a robust investment strategy.

Because you are a human being.

 

Don’t be a confusopoly victim. Talk with an advisor and create a strategy that works for you.

 

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Ken Moore

Written by Ken Moore

Ken’s focus is on investment strategy, research and analysis as well as financial planning strategy. Ken plays the lead role of our team identifying investments that fit the philosophy of the Global View approach. He is a strict adherent to Margin of Safety investment principles and has a strong belief in the power of business cycles. On a personal note, Ken was born in 1964 in Lexington Virginia, has been married since 1991. Immediately before locating to Greenville in 1997, Ken lived in New York City.

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