Around the time of the stock market lows in March 2009, an acquaintance, who is in his mid-fifties, was chatting about the economy in general and, unsurprisingly, touched upon the market downturn. He asked about my investments and I mentioned that (since I was invested solely in stock index funds) I had a paper loss to report too. I mentioned that I am trying to learn about how the market works and analyze my stocks (not that I will ever become a trader; being an investor suits me just fine!).
His retort? “Oh, the best in business can’t pick winning stocks most of the time”. He paused and then went on “how are we (laypeople) supposed to know?”. His argument was that we should let the financial professionals manage our money and not think that we can do a decent job ourselves.
From our conversation, I learned that most of his retirement money is invested in stocks and mutual funds and so, he must have lost his share in the downturn. I do not know his exact paper loss but it could be substantial. If so, he has been ignorant enough to not have a fair share of his nest egg in conservative investments like bonds. Of course, if he had not sold during those lows, he would have been in safer territory now. In addition, he places too much faith on “the best in business”.
Now, I am not claiming to have unearthed a magical way to beat the market and its experts. The financial wizards of Wall (or Bay) Street maybe trailblazers but I’m not trying to carve a niche for thousands to follow. All I aim to do is to understand my investments. I’d prefer to learn – a little at a time – and be comfortable with my investments than trusting my cash to a mutual fund manager who will beat the market this year and possibly, lose the gains (and maybe, the principal too) in a few years’ time. If I turn out to be a damp squib in investing, I will live with the satisfaction that I tried and found my incompetence. Some people, like my acquaintance, don’t even want to try because, to them, it is a loser’s game.
Finally, it could just be that he was envious that a guy around half his age is making an effort to learn about and understand his investments. The baby boomer probably rues his lost chance and the regret manifests as discouragement to green DIY investors like me.
Make no mistake: I’m not going to understand value investing so well and follow Mr. Buffett into the annals of stock market history. But, is it illogical to trust one’s own judgment after gaining a fair share of knowledge? I’m sure you would have seen the qualities mentioned (in the title of the post) portrayed by people at different points of your life.
Have you had people rebuke your attempt to learn something (not necessarily investing) that most people leave to “expert brains”? Did you pay heed to their words of wisdom? If not, how did your attempt turn out?
Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism, when the mood strikes – which happens everyday!-> If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).