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When you think about it, everyday life is full of questions, both small and large. Much of your financial life revolves around addressing the right questions, not just finding the right answers. If you can sort out the questions that are most important for you, the answers will be easier to find.
7 Crucial Questions Facing Investors
1. Who do you think might have the right answers, but you choose to ignore?
We sometimes see this where clients choose to ignore the investing approach that is most advantageous for them, in favor of something that sounds more exciting. Over an investable lifetime, slow and steady usually beats fast and flashy.
2. What do you desperately want to be true that’s clearly not?
It’s easy to cling to beliefs that simply don’t hold up to scrutiny. Again, if you try to answer the wrong questions, your financial life will be imperiled. Leave politics out of your portfolio; adhere to reason over rage.
3. What haven’t you experienced first hand that makes you naive about how things work?
Nothing is more persuasive and instructive than actual first hand experience. Most of your financial experiences are infrequent. You don’t buy a house very often; you don’t invest an inheritance many times; you don’t retire but once or twice in your life. The relative infrequency of substantial financial experiences makes it difficult to translate those experiences into good decisions. This lack of real life experience leaves you vulnerable to mistakes.
4. How much do things outside your control contribute to your success?
Do you take credit for results outside your control? Good fortune and chance play a big part in life. Perhaps you have friends or colleagues who’ve been blessed with good luck and pound their chest saying, ‘look what I’ve done!’ Learning to accept things outside your control, while focusing on factors that you can influence, is the foundation of wisdom.
5. What do you ignore because it’s too difficult to accept?
Usually problems that you ignore don’t just go away; instead, they fester and stay in the background. Just like ‘open tabs’ on your phone or device, these things take up space and energy even if you don’t really see them very often. Your decisions are impacted by these unresolved problems. Ignoring these ‘open tabs’ isn’t a good solution.
6. What do you believe is true, but is really just good marketing?
Financial product marketing can be very effective. It’s important to understand that most financial decisions are made emotionally. Investment marketers know this and aim their pitches at igniting your emotions. The financial planning process establishes a framework around decision making that helps to minimize your emotional responses.
7. What financial mistakes have you witnessed others make that you want to avoid?
Everyone has seen a friend or neighbor make money mistakes that have negatively impacted their life. Watching these mistakes unfold and develop in someone else can be a powerful force for good in your own financial life. Avoiding big mistakes is one of the core principles of financial planning.
Making Sense of the Noise
So much of your financial life is tied to focusing on asking and answering the right questions. These questions are yours alone. What’s most important to you, isn’t important at all to someone else. Don’t let your attention be diverted to dwelling on questions that won’t impact your future.
Related: Your Financial Journey Is as Important as the Destination