Does your investing strategy empower you or scare you?

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:

You shouldn’t.

 

(Or, you shouldn’t that often.)

From Wealthfront:

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.