The 3 M’s of an investing strategy

An invest­ing strat­e­gy is more than just the tac­tics of how to invest. Unfortunately, most “invest­ing com­pa­nies” act like Americans trav­el­ing over­seas… you’ve seen it I’m sure.

When some­one says they don’t speak English, how does a typ­i­cal American react?

They talk slow­er and loud­er… in English.

Advisors and bro­ker­age mar­ket­ing is the same as our trav­el­ing American. They sim­ply try to fig­ure out how to say the same thing they’ve always been say­ing in dif­fer­ent ways. Start young. Buy mutu­al funds. You can spend 3% of your retire­ment sav­ings a year (no 4%, no 2%… how long are you going to live?).

Regular peo­ple, the kind I work with, tune out very ear­ly in that process. I’ve found it’s sim­ple:

1. People don’t trust “the banks”.
2. When peo­ple put mon­ey aside each month, but at the end of the month find their bal­ance is low­er than the start of the month, they respond by spend­ing instead of sav­ing. This hap­pens eas­i­ly if some­one has, for exam­ple, a $5000 port­fo­lio, adds $50 in a month, but finds that the $5000 dropped in val­ue by $75. Their end­ing month­ly bal­ance is $25 low­er than they start­ed even though they’ve ADDED $75. It’s demo­ti­vat­ing, habit break­ing, and peo­ple check out.

Money is as emo­tion­al as food. And, there are as many good strate­gies for invest­ing as there are for diet­ing. Few diet­ing strate­gies have to do with edu­cat­ing peo­ple about metab­o­lism rates, the way the body process­es food, or how food is made.

But that’s how invest­ment advi­sors pre­fer to describe their invest­ment strate­gies.

I prefer a human approach

A human approach to invest­ing involves three ele­ments:

1. Make sense. It has to make sense. Not at a “finan­cial edu­ca­tion­al” lev­el, but at a human lev­el. Tell peo­ple a sto­ry that they can relate to, that they can make their own, and they’ll find the curios­i­ty to learn more. They’ll have a frame­work in which to oper­ate and struc­ture their deci­sions; eval­u­ate their progress. I’ve been div­ing deep under the ocean, and the hard­est thing is find­ing your way in the open ocean when you have no ref­er­ence points to anchor your objec­tives to. Same goes with invest­ing.
2. Motivation. The the­o­ry of cre­at­ing new habits involves a trig­ger, the habit, and the reward. Advisors for­get the reward is NOT the act of par­tic­i­pat­ing. The reward is the results of par­tic­i­pat­ing.. The thing is, mar­kets have volatil­i­ty. If the way you mea­sure your results is lim­it­ed to port­fo­lio val­ue, peo­ple are going to go nuts try­ing to fig­ure out if they’re doing well. That mea­sur­ing will not rein­force the habit (because it’s not reward­ing). Invariably investors make the wrong deci­sions as a result. You have to cre­ate new met­rics that are designed to moti­vate the “reg­u­lar” indi­vid­ual investor. At least until they build up the resis­tance to mak­ing incor­rect deci­sions because of mar­ket volatil­i­ty. Change your per­spec­tive with the right met­rics, and you’ll change your entire expe­ri­ence (for the bet­ter).
3. Mastery. The path to mas­tery is long, but reward­ing. Even peo­ple who don’t want to become “experts” want to under­stand how to get bet­ter. How to learn more. How to make bet­ter deci­sions in the future. How to have a pride of own­er­ship in their finan­cial suc­cess. The thing is, most peo­ple get their finan­cial edu­ca­tion from “friends”, finan­cial news, or indus­try trade rags (where it’s most­ly pay-to-play). If you’re fol­low­ing Apple, do you read the rumor sites or their 10Q’s? Do you lis­ten to Jim Cramer or Tim Cook? Do you even know who the CEO’s of your com­pa­nies are? (I know every one by name and back­ground.) There’s a way to become edu­cat­ed over time, and devel­op a mas­tery over your strat­e­gy. You’ll gain con­fi­dence. Confidence breeds suc­cess, and bet­ter deci­sion mak­ing over time. There’s plen­ty of time to devel­op mas­tery over your life­time invest­ing strat­e­gy. I’ve been invest­ing for 35 years, that’s a long time to absorb and inter­nal­ize what mat­ters to cre­ate finan­cial secu­ri­ty for you and your fam­i­ly.

It goes with­out say­ing that my book does exact­ly this. In fact, the only addi­tion­al two top­ics in the book are my per­son­al sto­ry and a tac­ti­cal how-to get start­ed.

I’m also going to be sim­pli­fy­ing my free online course, coach­ing, and group edu­ca­tion into this struc­ture. When I do, the course is prob­a­bly not going to be free any­more. If you’re think­ing of switch­ing jobs soon, please have a look at the free email course as it speaks to peo­ple rolling over their 401K’s who are try­ing to decide how to invest the mon­ey now that they have more con­trol (and respon­si­bil­i­ty) for pick­ing their invest­ments.