I’m a big fan of the social media site, LinkedIn. It’s a good way to connect with other professionals, both in finance and in other related fields. Recently, I was online and saw a post from Daniel Crosby, Ph.D., President of Nocturne Capital. His Ten Things That Smart Investors Never Say was so good that I just had to share it with my readers! (The numbered quotes are Dr. Crosby’s, but the comments that follow are mine.)
1. “I got a great stock tip from a friend of a friend.”
Did your mom ever say, “If Jimmy jumped off a bridge, would you do it too?” Do you act as an individual, or do you go along with the crowd? Following the actions and emotions of a group of people could be dangerous to you – and your finances.
2. “This time is different.”
Nope. It probably isn’t. A tiger is still a tiger, no matter how many times you feed it.
3. “I should have seen the crisis coming.”
I have four crystal balls in my office, but none of them work! The best way to avoid a “crisis” is to plan for it ahead of time!
4. “I check my account on the hour.”
Are you more sensitive to losses than gains, and so stressed by the fear of loss that you have to keep checking your investments? Again, I believe good planning and proper diversification of your assets can keep a person from becoming obsessed with every movement of the market.
5. “This is a can’t miss!”
Yes, it can miss. Ask 20,000 ex-Enron employees.
6. “It just feels right.”
Maybe it’s just me, but I prefer well-thought-out financial decision-making versus quick decisions influenced by emotions. Don’t you?
7. “… but [the TV expert] said …”
I’ve said it before; just because someone is on television or radio does not mean they are an expert or that they are privy to inside information. (And, even experts can be wrong.)
8. “Rebalance? Why bother?”
Keeping your investments static over many years could be a mistake. Mutual fund holdings change. So do their ratings and performance. You may be too heavily allocated in one industry or sector. It might be time for a review.
9. “I’m on a hot streak right now!”
It’s hard to get up from the blackjack table when you are winning. Past performance is not indicative of future results! Why not walk away with gains rather than risk it all and lose everything?
10. “I can always start saving later.”
You can choose a smaller reward now (buying unnecessary items today), or a larger reward later (a well-funded retirement account for the future). Which should you choose?
These were insightful quotes, don’t you think? Have you ever thought, or said, any of them yourself? I bet many of us have! My thanks to Dr. Crosby for permitting me to print the contents of his social media post in my PlanStronger™ column.