"The cautious seldom err."
Confucius (551 - 479 BC)
Trust is the most important variable in the investment process. When trust is present, anxiety levels drop and you will not have to worry about your investments or worry that somebody else is doing better than you are.
Even though trust is a vital part of dealing with other people, organizations and institutions, it seems that few people trust any one thing for very long.
Investors move from one financial advisor to another. They skip from one stock to another or from one mutual fund to another. Often without realizing what they are doing, they make major changes in their asset allocation based on seemingly fleeting information.
All this seems to be counter-productive to long-term investment results. The media and the investment industry seem to be conspirators and boosters of this phenomenon. Their tactics may be effective in attracting money, but they are counter-productive to the long-term goals of investing.
In crude terms, a manager who wants your money has to persuade you to do three things:
1. Give up your trust of your current manager,
2. Place your trust in a new manager, and finally
3. Keep your trust in the new manager!
If you study financial ads, you will see that most of them are trying to build the bridge of trust.
Underneath much of the advertising and marketing of the investment business is the unspoken hope of undermining the trust an investor has in his or her current advisor or money manager.
A stockbroker who wants your business hopes you will lose your trust that you have on your current broker.
In fact, the whole business is designed to capture control of your assets, and huge amounts of money are spent in order to achieve that goal.
As a result of all this, it is no great surprise that many investors have lost the confidence that anything could be a really good long-term investment.
Investors are well trained to be skeptical of advertising ...
Which ad would you pick up first?
The one with a headline promising a new investment that could double your money, or would you get the competing ad claiming that a 30 year investment strategy is the best?
How much do you trust the people who write for financial media. Do you trust them to know what's best for you? Do you trust them to be straight with their readers and to present the complete story?
Ultimately, nobody can reliably tell you what is the best investment for you without knowing a lot about markets, and your own particular needs. You're likely to be the best expert on yourself.
But unless you are an investment professional, you'll probably have to rely on other experts regarding markets and investments.
Many people have substantial portfolios but only a general knowledge of investing and they rely totally on their advisors.
These investors seldom, if ever, delve into a prospectus and their investment decisions boil down to one all-important choice:
Who do they trust?
On the other hand, some other people make a good effort to understand the investment process. But the number of choices and the amount of data now available are overwhelming, and many of these people eventually throw up their hands.
They are still do-it-yourself types and rarely trust any one advisor. But they do tend to lend their trust to the media, believing that they have done their homework for them.
But that trust may be misplaced. These investors usually don't have a clue that many of the articles they rely upon were spawned in the public relations department of a mutual fund company, a brokerage house or some other investment product firm.
Do you trust that there is a "right" way for you to invest your money and you just have to discover it? Everybody has a better idea for what you should do with your money, and everybody is eager to do it for you!
Whatever your portfolio is, there are only two people who are likely to agree with it completely:
You and whoever designed it!
You will never be able to find any money manager or a stockbroker who will look at your portfolio and conclude that it's perfect for you and urge you to make no changes!
The investors most likely to succeed are those who are constantly learning more about investing and who find their advisors worthy of their trust.
That means advisors who have two things:
A. Competence and
B. The same interests as their client.
When you find such an advisor ...
Give him or her YOUR TRUST!