BUZ LIVINGSTON: Avoiding financial stumbles

Published: Sunday, February 23, 2014 at 09:25 AM.

Over the last few weeks we have gone over financial pratfalls common to everyone.  I didn’t know how to end this series so for the finale I came up with a financial tripwire smorgasbord.

See if any of these ring a bell. 

If you don’t realize most financial companies have a business predicated on exploiting the emotions and the lack of financial intelligence of its customers, then you have a problem. An advanced degree, an Ivy League education or acing the SATs matter little to investing success. The most important investing skill is control of your emotions. Investment plans don’t fail. Rather investors fail by either taking too much risk during fat years and/or bailing out during the doldrums.

If you hear an investment pitched with any variation of “It’s different this time,” run like a scalded dog. Return is tied to risk and always will be. Back in the glory days of South Walton real estate (still pretty good), vast fortunes were made — need I say more?  In card games, if you don’t know who the mark is it’s probably you.

When expecting outsized returns, someone carries the risk, don’t find out the hard way the beast of burden was you. 

Lots of us are guilty of confirmation bias or only seeking information agreeing with our pre-existing ideas. You have to challenge yourself and sometimes you learn.

Here’s a personal case. For years I rang the claxon warning about the evils of variable annuities. At a conference I was astonished to see scheduled a presentation about the benefits of these loathsome creatures. When pigs fly, I thought, but I went along anyway. I left somewhat humbled. 

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