Is There Such a Thing as â€œGood Adviceâ€?
DECEMBER 08, 2016
Jeff Brown, MD
Good advice – it’s the hardest thing in the world to find, but let’s start with this mental trick from Wharton Professor Rom Schrift. When you are facing any decision among choices, financial, or otherwise, add the option of “do nothing” to the list. Research shows that this small addition to your set of choices will subtly remind you of your goal and help you stay disciplined.
And for you market watchers, Paul Marsh, of the London School of Economics, points out that, “You don’t get bargain prices anywhere without the presence of really bad news.” In the long run, his research has shown that, “Countries with the fastest economic growth tend to have the lowest stock market returns, and vice-versa. That is because investors overpay for optimism and underpay for the value that pessimism creates.” It’s another vote for going against the herd to make big gains, ala Warren Buffett.
Christina Bechold, of Empire Angels, recommends that if you are looking at a start-up investment, talk to others who are also looking at it before you commit to make sure that you are all getting the same story and the same facts. If you are not, pass on the opportunity for that reason alone.
If you are looking for financing for a new venture, consider a so-called “family office.” These are private wealth management firms operated by ultra-wealthy families. The trick is how to make contact. As in so many things in life, it depends on who you know for a personal connection and introduction. If you are interested, try a business broker or strategic growth advisor to start the “six degrees of separation” search.
In the “What to tell recent college grads” department, Manisha Thakor of Buckingham, advises that telling such folks to buy companies (if they have the wherewithal, that is) whose products and services they know and like is only seemingly reasonable on the surface. “For the vast majority…the path to…wealth…includes living below your means, (regularly) saving money, allocating among stocks and bonds using low-cost mutual funds and keeping fees and taxes as low as possible.” Sounds like pretty good advice for those of us a bit longer in the tooth than recent grads, as well.
Michelle Higgins, of California Financial Advisors, also gets back to the basics when she says:
1. Don’t talk about the market around the water cooler – it will only make you nervous and uncertain, so…
2. Get your advice and guidance from a professional financial planner
3. (A corollary of 1) Don’t look at your portfolio or the market daily, but…
4. Do otherwise educate yourself about financial affairs in an on-going way, by reading widely, say, while you…
5. Maintain a time horizon of at least seven years. That should allow time for recovery from a regular, if unpredictable, down cycle.
Lastly, Tom Bakke tells us that if anything about your investment approach is making you unhappy, just stop. Then reorganize in a way that does make you happy. Life is too short for artificial unhappiness.
Replication of 'Marshmallow Test' Reveals Delayed Gratification May Be Less Predictive of Later Outcomes