Mental Block Investing

I don’t know why we have mental blocks. But we do. And nowhere is this better exhibited than with otherwise intelligent people when it comes to their investing. Let’s see if any of the following apply to you.

I don’t have much in my account (401k, IRA, brokerage account), so it doesn’t matter.

Really? Well, then give me your money since you don’t seem to think it’s worth much.

You have no idea what the expense of your mutual fund or ETF is.

Do you buy anything else in your life without knowing the price? I didn’t think so.

You don’t think a 1% – 2% fee charged to manage a mutual fund or ETF is very much.

Do the math, especially if you add inflation to the mix. You could be down 3% to 4% before you even begin. Then multiply this percentage by the number of years you own the fund. Ironically, the better performing funds historically are index funds, which are not highly managed and therefore have fees of about .1%.

You have never asked your financial advisor or broker how she/he gets compensated.

I’ll give you one guess. Those funds she/he is recommending pay the compensation out of the money you’ve just invested in them. Seems like a conflict of interest, no? Always use a fee-based payment structure.

You believe that returns (and the preservation of your principal) can be guaranteed.

By whom? Other than bank deposits and money market funds guaranteed by the government, up to certain limits, there are no other guarantees. None. Be especially wary of those

Leave a Reply