posted on March 25th 2016 in Fort Worth CFP Team Posts & Your Financial Advisor with 0 Comments /

Have you ever gone into the grocery store on a whim when you had some extra time? No list in hand, just time to spend in the store. You wander aisle by aisle, picking up a few things that catch your eye. You grab a few staples. Maybe a few treats you haven’t had in awhile. You then take your bounty home, only to realize you have a collection of food items but nothing that could really come together to make a suitable meal for any human not residing in a college dorm.

This is exactly how most people do investment research and management. There is no plan, just a collection of random information much like your collection of food. Maybe you pulled some ideas from the talking heads on TV who sell ads for their network under the guise of giving investment advice, got some information from something that popped up on your newsfeed on Facebook, or learned about a stock from news article on a financial website that just happened to be in the news on the day you happened to look at the news.

Listen up: “Finding some good stocks/funds” is not a plan.  

Google searches, financial televangelists on the business channel and random articles you run across? That’s not research.

This “wander the aisles” approach pushes information to the forefront of your vision that may have no business being there, just like what was on display at the store when you went shopping without a plan. You end up digging into a stock that shouldn’t have even passed an initial filter. You try to fit that news story you heard about wind energy, the Chinese middle class, Apple’s earnings or some other random story into your “plan.” You have a collection of information and no way of weighing it out and determining what is important and what isn’t.  Then you set out to prepare a meal (an investment plan) with what amounts to picking up pickles, ketchup, a frozen pizza and popcorn from the grocery store.  

Further, if you already had any preconceived notions or emotions about the market, your subconscious brain sought out information to confirm what it already wanted to do while you collected information. This is similar to the way that someone with a sweet tooth leaves the store with sugary treats even though none were on the shopping list. Psychologists call this confirmation bias — the tendency we have to look for information to confirm what we already believe, or to interpret information in a way that gives support to what we already suspect.  This happens without our effort, completely subconsciously, and it often causes us to do things like ignore important information while focusing on less-important information.

Professionals attack investment management and research with a plan. They have metrics for weighting information and thinking of outcomes in terms of scientific probabilities instead of mental math. They have a discipline that dictates which investments they should spend time researching in great depth, and which shouldn’t be given the time of day. They don’t try to answer every question they could possibly conceive, but instead seek to understand which questions are truly important to success and seek answers for those. Knowing which questions to ask is more valuable than the answer to a question that doesn’t affect your success!

When you consider the well-planned and strictly executed plan of a truly professional advisor, think of it like a meal. All the ingredients came together for each dish, and each dish came together to make a meal. Adding randomly gathered components (ingredients or dishes) will not improve the plan (the meal). Grabbing a random headline from the financial televangelist and throwing it into a professional investment plan is like trying to bring a bag of Cheetos into a fine restaurant and expecting it to blend nicely with the steak and lobster. Professionalism is all about understanding what is important and staying focused on it.

about the author: Joshua I. Wilson CMT

Josh-Wilson CMTJoshua I. Wilson, CMT®, AIF® is a partner and wealth manager who has managed over $2B for TD Ameritrade. Joshua led the national training and development program for all of TDA’s new advisors and managers, won a national coaching award. Joshua gave his graduation speech at Brown University. Joshua is a Chartered Market Technician® (CMT®) and a Accredited Investment Fiduciary® (AIF®).

Learn more and/or Contact Joshua

Continue Reading

Other articles filed under Fort Worth CFP Team Posts

Joshua to Speak at New Beginnings Church

August 1, 2017 - Joshua Wilson, Chief Investment Officer at WorthPointe, will speak at New Beginnings Church’s Wednesday Night Service on August 2nd. Joshua will blend practical advice and biblical principles with his own inspiring story of hope and determination. The talk will be...
Continue Reading

5 Ways Rising Interest Rates Matter to You

July 18, 2017 - Higher interest rates typically strengthen the U.S. dollar versus other currencies. That tends to make commodities that are dollar-denominated (e.g., crude oil and most global commodities) more expensive to foreign purchasers. “Dollar-denominated” means these commodities are priced in U.S. dollars...
Continue Reading

VIDEO: Should I Buy a House?

July 15, 2017 - [embed]https://youtu.be/EFc9g16fY4U[/embed] Is it time to buy a house? This is a very common question that clients  ask their professional financial advisor. Dallas financial planner and Chief Investment Officer, Joshua Wilson, CMT®, AIF®, discusses how to assess whether it’s the right...
Continue Reading

Joshua Wilson is a Featured Speaker at Global Private Wealth Forum

June 12, 2017 - WorthPointe Chief Investment Officer Joshua I. Wilson, CMT®, AIF® has been named a featured speaker at the Global Private Wealth Dallas Forum. Global Private Wealth Dallas Forum 2017 is a gathering for Ultra High Net Worth Investors and Family Offices...
Continue Reading

What’s the Deal with Trump’s Tax Plan?

May 17, 2017 - The questions about Trump’s tax plan are already coming in. Here’s a quick rundown of what you need to know. It’s not actually a plan at all — more like a very big picture wish list. It’s a couple of...
Continue Reading

Return to Blog Home