I was running and sweating at my gym. On the next treadmill was a wealthy man lecturing me on the secret to successful investing. "I know you think it is a cliché, but, the key point is that 'Bulls make money. Bears make money. Pigs get slaughtered' " He was missing something and it took me a long time to decide what I thought it was. An individual psychoanalysis of your money issues goes hand in hand with an individualized successful investment plan. The two are inseperable.
We live in a culture that espouses "one size fits all" solutions to real life challenges and as resources are increasingly constrained, financial pressures promulgate fast interventions that often are unhelpful, at times even harmful. A successful entrepreneur once shared that "There is nothing more expensive than inexpensive legal advice". Similarly, there is nothing more dear than believing that a financial roadmap designed by someone who does not know you will result in a good outcome.
Below are some helpful concepts to consider.
PRINCIPLE 1 YOU CAN NOT SELF ANALYZE WITHOUT A PARTNER
We are all blind and require friends, coaches, therapists and teachers to illuminate our investing neurosis.
PRINCIPLE 2 YOU CAN NOT INVEST MONEY THAT YOU CAN NOT AFFORD TO LOSE
Investing always involves risk of loss, and riding out fluctuations. Most common error, minimizing the risks out of a sense of overconfidence, then feeling emotionally devastated when you are wrong. The most pain is not the loss, it is the UNanticipated amount of the loss. As the Joker said in The Dark Knight, "People don't panic if it is all part of the plan".
PRINCIPLE 3 YOU MUST DO A DETAILED PSYCHOANALYSIS OF YOUR RISK TOLERANCE AND WHAT MAKES IT UP
No two people have the identical risk tolerance. It is based on more than your balance sheet and research data based on past performance. Your personal history, experience, anxiety level, relationships all influence how you process opportunities. Taking a few risk tolerance quizzes is a good place to start and can be found in multiple places. But it is the beginning of your process, not the end.
The devil is in the details.
PRINCIPLE 4 MOST OF US ARE AFRAID TO MAKE MONEY
Like it or not, most of us are raised to be at best profoundly ambivalent about achieving great wealth. What were your parents attitudes about money? How did they raise you to deal with your own desires for wealth?
PRINCIPLE 5 STAY AWAY FROM ADVISORS THAT LOSE YOU MONEY EVEN IF YOU LIKE AND TRUST THEM
Misplaced loyalty is an expensive, though natural and even noble quality. I have found it one of the hardest principles to master. I only invest with people that I truly like, and so it is hard to "fire" someone. By the same token, novelty is over-rated. Recording and analyzing your own past successes and failures is more important than reading the latest blurb on Bloomberg.
PRINCIPLE 6 NO ONE CARES AS MUCH ABOUT YOUR MONEY AS YOU DO
A strong case for staying involved if you allocate the task to others.
PRINCIPLE 7 THINK LIKE A SHRINK
In my book/article, "Think Like A Shrink", I try to share some of the basic tenets to understanding people. Our third ear listens not to what someone is saying, but to why someone is saying it. Cui bono, or "Who benefits?". My book was of 100 principles, if I could add # 101 it would be the old adage "Money brings out the worst in people". Sadly, age has reinforced my respect for the veracity of that one. Bear it in mind when watching TV and other experts.
PRINCIPLE 8 ANALYZE THE ANALYST Consider the source personality. The people who accurately predicted the crash are often not the same ones who predicted the rebound because there personalities are different. We are all at our core with either paranoid or depressive positions towards the world (hat tip Melanie Klein), so guess who saw it coming in 2007?
Thank you for the privilege of sharing what I know.
