A few times in the past week I’ve seen a question I hadn’t considered. I am sorta surprised that people even ask the question:
How often should I check my portfolio?
I guess it’s not the question that bugs me, but the generally accepted answer:
(Or, you shouldn’t that often.)
Checking your portfolio can be hazardous to your financial health!
I realize they’re being a little tongue-in-cheek, and in fact, I really like the early part of their article about loss aversion.
The thing that bugs me is that companies like Wealthfront — and to a large extent all mutual funds — ask their investors to take a ‘trust me’ approach to investing. Give them money, select a few parameters, and they’ll do the rest.
That would be great if they committed to results. Imagine buying a car. The salesman’s pitch was ‘trust me’ and when you get the car home it won’t drive. What happens? Well, they take the car back and give you another that does. But in finance ‘trust me’ becomes ‘too bad’ when you’re left with less than stellar outcomes.
The way I read the Wealthfront post is taking ‘trust me’ to a whole other level. It’s ‘trust me, and don’t look at how I’m doing’ (until it’s too late).
It just doesn’t sit right with me.
Money’s important. Like it or not, it determines to a good extent our quality of life. Our ability to retire. Our ability to treat ourselves. They’re asking you to abdicate any understanding of how the money you save to build wealth will work for you. Now, they’re also suggesting that you abdicate keeping tabs on how they’re doing with your money.
Why don’t they just provide a way to make your news better? There are two sides to the equation — the positive news and the negative. They’re asking you to avoid the negative, why can’t they give you more positives?
While there’s a place for mutual funds and other “black box” investments, I just feel that people should know more about how it all works. About what they’re doing and why they’re doing it.
That knowledge, that empowerment will minimize loss aversion. It will give people confidence and deep satisfaction in their ability to make good, informed decisions.
To enhance empowerment and that feeling of satisfaction (and to minimize loss aversion) I’ve created some metrics to give you a winning perspective for the Elephant’s Paycheck Blueprint. If you look at your portfolio and what matters is always going up, there’s no loss to be averse to. Then, by paying attention you can celebrate the wins and stop fear-based investing.
Anything that gets people building wealth, like Wealthfront, is constructive. I just prefer to empower people along the way.