Who hasn't devoted an hour or two moving cards from pile to pile in order to win a hand of solitaire? Our electronic devices make this endeavor even more accessible and convenient; a few errant minutes to beat the deck and reign victoriously over those same suited ordered cards—king high to ace low. Yes, I have spent those minutes in search of dominance. It is my masterful decisions that decide success vs. defeat; my choices of which card to stack where and what pile to turn over-after all. I know that my choices determine my success—it's almost like trying to pick the best investments or the best investment manager. Right?

Well, not exactly. Our brains are hard wired to believe, fervently and completely, in our ability to make the right decisions. If that were indeed so, given a choice to two moves, I would make the right one consistently—instead, I hit "play again" more times than not. We look at two moves, with the equal number of turned-over cards underneath and make a choice that has an equal chance of being right or wrong. The laws of probability are at play here, having nothing to do with intelligence, skill, or even experience.

The very same hard wiring that makes us think that we can divine, select, or make a good decision in solitaire is at play once again in the world of investment decisions. We can look at a "mountain" chart of returns and decide whether it's a good investment; we can listen to a broker or TV personality and make a buy or sell decision and feel comfortable that our choice was correct and not totally random. These actions, like a game of solitaire lead to failure more than success. In most cases, our beliefs do not help us make consistently good choices.

Recently, I was asked by a friend to provide a second opinion on an investment proposal for his cousin. She inherited a large amount of money and was being advised by her private banker on a sound investment strategy.

"He knows that I do not want risk!" She explained as she pulled her folder out of her briefcase.

"Tell me more, what do you mean by risk?" I asked.

She was momentarily puzzled by my question. "Risk? Well, you know, the stock market."

"There is more to risk than just the stock market. There's interest rate risk, tax risk, business risk, and inflation risk, otherwise known as purchasing power risk. In order to make a good decision, I believe it is important to understand each type of risk and see which risk poses the greatest potential for harm."

"Well, I've been working with my private banker for years, and I am pretty confident his advice is sound."

With that, she withdrew a prospectus for a long-term high yield municipal bond fund for my review. My eyes grew banjo-size, blinking with disbelief at the potential disaster sitting on the table in front of me. I took a breath.

"OK," I started, trying to gather my thoughts. "What you have here is a low-quality, long-duration/maturity, tax-free bond fund. I am not sure why you have been advised to buy a tax-free fund when your income in not very high, but I do know this comes with a great deal of risk. What you also have here is a potential disaster in the making."

I had just walked all over her belief structure; but she was not ready to acquiesce.

"How could that be? These are tax-free bonds—what could be safer than that and I don't have to worry about the stock market!"

"Yes, you are correct, the stock market's volatility will not impact this fund, but with interest rates being at historic lows, the minute interest rates begin to rise, the value of this fund will get hit hard. There is a significant amount of volatility in the bond market—it's call interest rate risk and it impacts the value of bonds in a changing environment. Now, if we were in a high interest rate scenario and interest rates fell, the value of the bond fund would rise. The longer the term to maturity on a bond, the greater the volatility. Your private banker has not done a thorough job in educating you on the various risks. In addition, based on your marginal tax bracket, you'd do better in taxable bonds than tax-free. I suggest you take a step back to understand all the issues more fully before you make this decision."

Our meeting ended cordially, although I knew I had upset her belief in the skill, knowledge and experience of her private banker and by extension, her own belief in her ability to know who to trust, believe in and advice to follow. The fact is, she wanted to believe in his advice and validate her trust in his ability. It is our hard-wired belief in our ability that can work for us, or like a game of solitaire, defeat us most of the time.

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