Q: I have saved up enough money so that I think it’s time for me to invest some of it. I have some friends who make all their investing choices on their own. Others use financial advisors whom I assume they pay somehow. My do-it-yourself friends tell me that using an advisor is dumb because they cost too much. My other friends seem to not mind paying for the advice they get. Who’s right and how do I decide which is best?
A: We never get as far away from junior high as we think we do.
You remember junior high, right? It was that wonderful time of life in which we began expressing our independence from parents and began to be our own unique, individual human being…just so long as that unique, individual human being looked, talked, acted and wore the same clothes as the cool kids at school.
We thought we were escaping the orbit…nay, the enslavement…of parental authority and finding freedom. In reality, we were trading what we would later see as a pretty good deal for voluntary slavery to the capricious tastes and opinions of our new found group of peers. As I remember, we desperately wanted to be able to call these popular peers “friends.” In reality, they were relational terrorists.
Comparison. It may not be a bad thing. Or it may be a disastrous thing. It all depends on how you relate to it. Does it inform you, or influence you?
Comparison can be an information seeking tool. You can use it to elicit information based on the actions and preferences of a group you trust – your peers.
Comparison can also be an influence subjugation trap. You can use it to elicit affirmation based on the approval and promptings of a group you fear – again, your peers.
So how can you use comparison as a tool and not a trap?
It’s all in the difference between could and should.
Using comparison to learn what you could do means tapping into these trusted sources (friends) to gather information about your options. In the example you’ve already provided, you have some friends who are investing “do it yourselfers,” and you have other friends who choose to use the services of a financial advisor.
Which group of friends is right? Maybe both.
The question is not “who is right?”, but “what choice is right for me?”
Using comparison to learn what you should do means you are still living in the world of junior high school. You do something not because it is right for you, but because you think it will garner greater acceptance with a peer group of which you desire to be a part. You allow your choices to be determined by the opinions of your most vocal and self assertive “friends.” Back in junior high we used to call these friends bullies (when they weren’t around, of course).
Hopefully just being aware of the toxic side of comparison will help you jettison this bad habit from your life.
You know your friends pretty well. You know their personalities, their strengths and their weaknesses (maybe even better than they are aware of these themselves).
Ask yourself “why would Alex choose to go it alone when it comes to investing?” You have the reasons Alex gives you. But you also have the luxury of knowing Alex pretty well, thus being able to evaluate what other reasons might be in play.
For example, suppose Alex explains his reason for his do-it-yourself investment strategy is cost savings. Fine. But you also know Alex is a control freak and can’t stand to be out of the loop on important details in his life.
Or maybe Alex is indeed very confident in his abilities, competent in the investment arena and enjoys the process of managing his own investments.
On the other hand, your friend Brad has chosen a financial advisor and gives as his only reason, “I just like her.” But then you also know Brad to be a very busy individual who is used to delegating a lot of things in his life. Brad doesn’t clean his own pool, mow his own lawn, leave his fitness to chance (he uses a personal trainer) and chooses to focus his energies on what he believes he is good at.
Or maybe Brad is utterly afraid of the financial markets, does not trust his own emotional reactions to investment volatility and would pay nearly any price to make sure someone he trusts is minding the store.
They both are. They are each doing what is right for them.
So go and do likewise. Use comparison as an information gathering tool to better understand the range of options before you, and how those options are utilized by friends you trust.
Just be sure you let comparison tell you what you could do, not what you should do.
Let comparison be a tool, not a trap.
BYRON MOORE: Real world financial fitness
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