The gap between Investor returns (a person who has put all their money into a “let it ride and see what happens” strategy) and Investment returns (i.e. whatever the NASDAQ and S&P have done) has widened substantially. This has happened year over year and people are sticking by what they have or had. Why? Because that is what they are used too and they let their biases take over.

“I heard from my friend, who I’ve known my entire life and trust more than anyone, that this investment worked for them, so it will work for me.”

Let me tell you something, I love my father, whole-heartedly and I have learned a lot from him and trust him more than anyone in this world. However, he listens to his friends when they tell him how much money they made on a certain investment and he then turns to me and asks the question: “How did I miss the mark on that? And why didn’t we invest in that?” I have to talk to him, not just as his son but as his advisor, and let him know that we have a holistic financial plan in place for him and my mother for a reason. This lets us focus on the return on investment they need, rather than what they think they need. I let him know that it is only what his friends told him that he is listening too, not the story behind it. What does everyone tell you about when they come home from Vegas or a casino? They tell you about how much money they “made.” No one comes home and tells you about how much money they lost or gave up to “make” that money. Just like no one ever tells you how much money they saw go down when they were “letting it ride” on their investment. They might have made a fortune this year, but over the life of the investment, they may in fact be down. They didn’t have anyone to help them along the way because they felt they didn’t need it or they felt they didn’t have “enough” to be worthy of a plan or advice. This is where they are wrong.

have an investment planWhen you think about it, the “investor who lets it ride” should hit fairly close to the benchmark they are tracking (after they deduct the fees associated with owning the investment.) What do we hear time and time again? Buy low and sell high! This is always easier said than done. Having a plan in place and someone to help you, makes this notion become more consistent over time.

Holistic financial planning  and wealth management, can serve as one of the solutions to this trend of inexperienced investors heading into the financial battlefield, with nothing but overconfidence. This might be admirable to some, but not having a plan, even a preliminary one, is the biggest pitfall among investors. Sometimes, this is because they fear the discussion of issues that they do not want to hear (putting more money away, spending less, budgeting, making money work harder) Just because someone doesn’t want to hear it, doesn’t mean that it is not a necessary step to take. Remember learning to ride a bike and your parents pleading with you to wear a helmet or knee pads? I was 7 years old and I didn’t want to hear it because I was invincible in my newfound skill of two-wheeled freedom. Long story short, I took a corner too sharp, the bike skidded and I followed suit. I came out with some bumps and bruises, but not as many as I could have if I didn’t have those pesky knee pads and helmet. I might have not wanted to hear it, but it turned out for the best in times of crisis, and I was better prepared for a fall.

There is no better feeling than having a plan in place to act as a hand to hold (or a helmet on your head) when volatility and uncertainty try to disrupt you from getting what you truly want. Working with a Registered Investment Advisor who is a fiduciary, which has your best interest at heart and creates a plan with you, not for you, is the best way to ensure that you take the steps to the financial present and future you deserve, while making those bumps along the way that much less intimidating.

Written by Dawn Beers

Dawn Beers

Dawn heads up our marketing department where she is responsible for the general oversight and management of the Bank’s marketing and public relations initiatives. This involves managing the planning, organizing and directing of our advertising, public relations, product development, sales promotion and research efforts.

View Profile