"Conventional Wisdom is what is thought of to be true - until the truth is discovered." anon
Now there's a statement to wrap your mind around. It's almost crazy making! But think about it: the idea of conventional wisdom has been with us since man emerged from the slimy ocean or pond or wherever we really did emerge from (some conventional wisdom tells us that we just appeared: whoosh!) Like it or not, our thinking, actions and the advice we give to our children is all imbued with conventional wisdom. And don't even get me started about the "facts" presented on the news....
In a field where the "experts" rarely agree on anything, financial forecasting is big business. Pundits perform at the drop of a microphone for reporters anxious to hear their version of conventional wisdom. I recall an interview several months ago when a reporter asked me how the stock market would be doing in 2011. Not wanting to add to the already burgeoning pile of steaming conventional wisdom, my answer was, "The stock market will definitely perform next year. It might be up, down or flat." After a moment, the stunned reporter pushed harder for a "real" answer. I considered responding with a verse of truth from the Rolling Stones: "You can't always get what you want..." but instead I explained that I was not in the predicting business but in the business of helping people articulate their values and live more closely to them. He rolled his eyes and moved on. Apparently my wisdom just wasn't wise enough.
Conventional wisdom tells investors to SELL HIGH and BUY LOW. OK, I'll hand conventional wisdom that one. In order for this to make sense though, you have to know what is high, and what is low? It's all relative, right? Well, yes and no. Yes, it is all relative; but you certainly know when markets are at or near historic highs. This doesn't mean it won't go higher, but you know it IS high. You also know that during a recession, market prices are low (relative to the highs). What keeps investors from making that daring leap from high buyers to high sellers or from low buyers to low sellers? Meir Statman's book What Investors Really Want provides exceptional examples for those who want to understand more fully the dynamics behind investing. The human animal loves to over-think and over-analyze and generally hates to be the one holding the short straw, i.e. the last to buy, the last to sell. In other words, our stock market is levied by the fact that while we may postulate otherwise, humans prefer to follow the herd.
Is this hypothesis true for you? Let's find out. What is your definition of success? More to the point, where did this definition come from? How has it been affected by your neighbors, colleagues, family and friends? So many of today's surveys and articles would have you believe that there is a common belief, a common definition of success that we should all attain to. But I propose that such definitions are at best culturally biased, and therefore not universally true. In other words: don't drink the Kool-Aid!
In order to help put these concepts in another perspective, here's a brief list of MY conventional wisdom.
1. Don't believe anything the "experts" say.
2. Following the herd will land you in the corral on the way to the slaughterhouse every time.
3. Don't worry about what anyone else does; they're not smarter than you are - even if you think they are (this is especially true for doctors and attorneys.)
4. Gamblers and stock pickers share the same genetic code that allows them to only tell you about their winners.
5. True success is an outgrowth of articulating your values and living them.
This unconventional wisdom flies in the face of almost everything you hear or read, but that doesn't detract from its efficacy. Steer your financial decisions to coincide with what you really care about, not what you hear or read. Ask yourself whether your decision brings you closer or further away from your ultimate dreams and goals. Some may call this unconventional, but I just hum a different tune: You Can Always Get What You Want...
