Updated: Jul 16, 2021
There is something incredibly satisfying about seeing a bully put in their place. It is an unfortunate fact of life that bullies have existed as long as humanity has been around. Chances are that even if you have never been a victim of bullying, you know someone who has. As a result, we as a culture derive immense satisfaction when our favorite heroes finally overcome their adversary. There are many examples in film that I could talk about ranging from Spider-Man (2002) to A Christmas Story. However, the one that I find to be most inspiring is the rivalry between Daniel LaRusso and Johnny Lawrence in The Karate Kid (1984).
In the film, Daniel is constantly harassed by Johnny and his fellow karate students after they see him flirting with Johnny's ex-girlfriend. Though he had taken a few karate lessons before, he was clearly outmatched and outnumbered. It wasn't until Johnny's gang chased Daniel back to his apartment complex and began beating him up that Daniel finally got the help he so desperately needed. The apartment maintenance man, Mr. Miyagi, came to Daniel's defence, displaying a surprising prowess with martial arts. After watching Mr. Miyagi send Johnny and his friends packing, Daniel asked Mr. Miyagi to teach him karate. Though initially reluctant, Mr. Miyagi eventually agreed.
Unfortunately, bullies are not restricted only to the schoolyard. Bullies exist in every facet of life, including investing. It is important to be able to recognize these bullies, even the Wall Street Bullies, for what they are and, like Daniel, arm yourself with the knowledge to be able to defend yourself from them.
The first type of Wall Street Bully is the most easily recognizable after the fact because they are the ones that usually end up wearing orange jumpsuits. These are the Con Men. People like Bernie Madoff, Reed Slatkin, and Allen Stanford play off of your fears and deepest desires, promising you safety and high returns while lining their own pockets.
The second and probably most common bully is known as a Prognosticator. These people are the ones who tell you that they have some ability to look into the future using "cutting edge methodologies" or "the smartest minds in the country" and can tell you which way the market is going to move and when you should get in or out. Some of them will even end up on the cover of financial magazines or on shows like Fox Business.
"If anybody tells you they know with any kind of precision which way the market will move, run, do not walk, in the other direction."
~Dr. Harry Markowitz, 1990 Nobel Laureate
The final Wall Street Bully is the Guru. Gurus are similar to Prognosticators in that they also pretend to know the future, but in regards to individual stocks as opposed to the market as a whole. They will often tell you that they have inside connections, some understanding of the market, or that their fundamental analysis of a company tells them whether that company is going to take off in the near future or be a bust, and they claim that they can get you in all the winners and out of all the losers. Another name for this is "active management."
One thing that all of the Bullies have in common is that they all subscribe to the same destructive myths around investing:
Market Timing - any attempt to alter or change the mix of assets based on a prediction or forecast about the future.
Stock Picking - choosing stocks based on a belief they will do well in the future.
Track Record Investing - the use of performance history to determine the best investments for the future.
These investing myths can have a devastating effect on your portfolio, your future, and your life.
So how do you protect yourself from these Wall Street Bullies? The best way to protect yourself and your future is by following three academic investing principles.
Disregard the Destructive Myths That Surround Investing
Learning how to recognize the investing myths can make it a lot easier to see the bullies for what they really are and can, in the long run, save you a lot of headaches.
Work With a Fiduciary Who Is a Financial Coach And Not a Salesperson
A fiduciary has a bound legal and moral obligation to put the investor's needs ahead of their own. Working with a fiduciary who is also a financial coach means that they seek to educate investors about prudent investing habits and help them maintain the discipline to stay long-term focused. Additionally, a fiduciary doesn't work for commissions, meaning that they lack the conflict of interest that inherently exists for many commission-based brokers.
Analyze Your Portfolio Under the Guidance Of a Fiduciary
Having your portfolio analyzed is one of the most important things you can do for your investments. The majority of investors have no clue what they are really invested in, and knowing what is actually in your portfolio can lead to a better understanding of where you stand as an investor. One tool that can be used to accomplish this is the Portfolio MRI. Much like a medical MRI, a portfolio MRI takes a deep dive into what exactly you have inside your portfolio, and allows your coach to identify where the problems are and how to go about fixing it.
In The Karate Kid (1984), there is one theme that I find to be particularly powerful. When Daniel realized he was outmatched, he actively sought out someone who could teach him how to defend himself. Investing can sometimes be stressful and confusing, especially for those who don't know what they are doing. When you don't know how to do something, whatever it may be, the best thing you can do is find someone who does and learn from them.
Navigating the Fog of Investing
by Mark Matson
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Your portfolio is trying to tell you something...
Are you listening?
It is amazing the number of investors whose risk tolerance does not align with their portfolio allocation. "I'm aggressive" or "I'm conservative" is no longer adequate or suitable in today's investing environment.
How much risk do you feel comfortable with? How much risk do you need to reach your goals? How much risk are you currently taking? Your portfolio is desperately trying to tell you this and much more. Are you listening?
To find your Risk Number, click the link below.
Be An Advocate
Do you want to empower families in discovering their True Purpose for Money?
Do you want to help equip others to defeat the Wall Street bullies?
Do you want to see families discover for themselves how investing works and to be left with the knowledge to make powerful choices for themself, their family, and their future?
If you answered yes to any of these questions, then you can be an advocate for those you love and care about.
Here's how simple it is:
1) Invite someone to join you at one of our upcoming events.
2) Forward this to someone you care about.
Most people will not pursue these things without someone like you advocating for them.