If I told you to walk in a straight line, could you do it? I hope you could. Now, what if I blindfolded you and then told you to walk in a straight line, could you do that? You might say yes like most people would, but it is not that simple. Watch this video to see why:
No matter how confident we are that we can walk in a straight line with a blindfold on, we really can’t. Now let’s compare walking with investing or saving for retirement. You are you, the field you will walk across represents your progress, each step you take represents time, and directly across the field from you is your goal (this could be a specific amount of wealth and date to retire, or an amount of return from your investment portfolio). If you can see the goal directly in front of you, even though it is across a field it is not too hard to take the necessary steps in the right direction to reach the goal. But too often we tend to put blindfolds on ourselves and assume we can still reach the goal only if we start walking. Like the group of men in the video that set out from a barn in the fog, walked in circles and ended up where they started, if we do not have markers or a reference point we can very likely end up back where we started.
At Arista Wealth Management when we encounter clients or prospective clients both individuals and institutions we find out that many of them have been walking blindfolded through their investing. They don’t know it, but they put blindfolds on themselves from watching popular investment media, reading too many magazines, or getting investment advice from amateurs. These individuals and institutions like many others have great intentions to walk across that field and reach their investment goals, but they go in circles because they don’t have markers set up to let them know that they are on the right path. If we do not have an objective or marker to guide our way, no matter how much we want to walk in a straight line, we will only end up going in circles. At times we might actually arrive right back where we started.
How do we avoid walking in investment circles?
First, we need to have a specific objective—a place we want to get to. Second, we need to set up markers along the way to assure ourselves that we are on the right path. Lastly, we need to avoid those things that try to blindfold us. Popular investment media distracts us from our objective and markers by giving us the desire to go with the new exciting thing, or to fear a financial disaster in the future. Investment amateurs, that could include family and close friends, can tempt us to give up the sight of our objective for a new thing or change our path to something that might benefit them.
The truth is that there are many ways to be blindfolded as we make our way across the field to our investment goal. The best investment strategy is to have points of reference, markers along your way, and always have your eye on the objective. It’s simple. If you feel you are walking in circles with your money, call us or a Fiduciary Advisor.